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It’s finally happening – your child is all grown up. They just walked across stage to receive their high school diploma, and, in the fall, they’ll begin a new adventure as they enter college. It’s a big life change – for you, and for them – and a smooth transition requires a bit of preparation. 

But while you’re counseling them on campus safety, maintaining a dorm room or apartment, and advising on class schedules, you may want to consider discussing sound financial practices, as well. 

Financial Habits Start Early

Many parents, like Jackie Boxell, Banking Center Manager with First Merchants (NMLS UI: 1227642), begin preparing their children for financial independence as, well, children. 

“When he was about four, we gave my son three separate jars for his allowance,” Jackie shared. “There was one for saving, one for tithing, and one for spending – so every time he got money that’s just what he would do.”

Jackie also worked hard to teach her son vital lessons that would set him up for financial success.

“I taught him how to balance an account register – to not rely on an ATM to know the state of his finances,” she explained. “And my husband and I would invite him into our annual financial planning and goal setting sessions so that he could learn it takes purposeful planning to be financially successful.” 

Jackie’s son is equipped with a checking account, two savings accounts, and a CD—and he’s an authorized user on her credit card so that he can work on building up credit. 

But even with that solid foundation, there are still conversations Jackie knows she’ll have to have with her son as he prepares to leave for college in the fall. 

Want to help your child start off on the right foot? See our tips for personal finance! 

 

Teach Your Child How to Budget

Maybe you, like Jackie, helped teach your children how to save money and have helped them open checking and savings accounts. Or maybe it’s a topic that hasn’t come up yet. Either way, as your loved one prepares to leave for college, a good first step is to teach your child how to build a solid, reliable budget. 

Assuming the cost of tuition, room, board, and basic necessities are covered, your child should still have a budget for “fun money” and other expenses. 

“Sit down with them and help them establish a budget for what that first semester is going to look like – this is what your child has saved, this is how much they’re willing to part with this first semester, this is how much we as parents are going to contribute, then break it down weekly,” Jackie advised. “Some kids might even need it broken down daily at first.” 

 

Want to know how to create a budget? Our Budget Calculators can help!

As you build that budget, talk with your child about expenses that might come up that they should plan for – whether that’s gas, planned trips, or honor society, fraternity, or sorority dues.

Jackie also advises talking to your children about social gatherings and expectations, and the financial cost that can come along with those. 

“For example, is your child’s friend group going to meet for coffee every day? Go out to dinner once a week? Those things can add up,” she explained. “With my own son, we’ve talked about how he’s not going to be able to say yes to every request to hang out or every opportunity that’s presented to him – if he does, his money is going to run out really quickly. So, we’ve advised him to prioritize what’s important to him.” 

 

Teaching Money Mindfulness

Jackie also suggests that a conversation about money mindfulness should go hand-in-hand with building a basic budget.
“We talk to our son to be aware of how much he’s spending, and what he’s spending it on, so he’s not unconsciously draining his account,” she shared. 
It can help to teach your child to track their own spending using a balance sheet or a check register. 
“Sometimes transactions get delayed, or don’t appear in your account immediately, so if your child is just using the ATM to keep track of their balance, it’s not going to give them an accurate snapshot of where they are financially,” Jackie explained. 

 

Want to see if your child is prepared? Try our Money Personality Quiz.

Utilize Safeguards

Another way to help your child financially prepare for college is to make use of various account and financial safeguards as your loved one learns to manage money away from home for the first time. 

“With my son, we have all kinds of safeguards in place to make sure he doesn’t overdraft his account, et cetera,” Jackie explained.

This could be setting up things like text alerts when a large amount is placed on your child’s card, to help keep an eye out for fraud, being listed as an emergency contact with your child’s financial institution, ensuring that Debit Card Controls are in place on your child’s accounts, and being an authorized user on their account.

 “I’d really encourage parents to stay on their kids’ accounts at least through college,” Jackie advised. “That way you’re able to help them if there ever is a financial emergency, and it’s an extra set of eyes to keep an eye out for fraud or identity theft.” 

Educate your child about scams and other financial pitfalls

But being financially independent is about more than money know-how and best practices – it’s also about being vigilant and aware of scams and financial pitfalls. 

“Since I work for a bank, I’ve always worked to educate my son on the latest scams,” Jackie shared. “If you don’t know the ins-and-outs, I would recommend at least sitting down and having the conversation of, if you get a text or an e-mail that sounds too good to be true, it is.” 

Get updates on the latest fraud trends at our Security Center.

 

High school graduates also become desired customers for credit card companies, so parents should take pains to discuss responsible credit card usage with their children – or even advise them to avoid one, altogether. 

“Personally, I think having a credit card as a freshman in college is asking for trouble – and I say that out of my own experience,” Jackie shared. “As a college freshman I was not financially prepared at all. I signed up for a credit card in exchange for a free t-shirt – I didn’t know any better at the time – and I ended up spending money like it was candy. Obviously, that came back to bite me. I do not want my son, or any child, to have that experience.”

Instead, Jackie has talked to her son about how to responsibly use a credit card and added him as an authorized user on her own card. When the time comes for him to get one in his own name, she'll counsel him to pay off the balance, in full, every month; and to not use it for big purchases.

 

“Essentially, I’ve told him to use it just for gas,” she shared with a laugh. “Because you know you’re going to need to purchase it regularly, and that’s something that is easy to pay off in full each month.” 

More Resources

If you want to do some more research on preparing your child for a successful financial future, you can find helpful articles, tips and tricks on our resource hub. Or, check out Financial Wellness powered by Enrich for modules, learning opportunities, and more. 

Our attentive local bankers are also available to discuss sound financial habits with you and your child and can even help you put together a robust financial strategy for your loved one’s first semester away at school, and beyond. Find your nearest banking center and come see us! 

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