As many of us prepare to drop off our kids at their college campuses, how can we make sure that they not only enjoy these four years of their lives but also make financially responsible decisions that will set them up for success in the future?
In this video James Lenhoff, President of Wealthquest, gives college freshmen three important money tips that will help them make smart financial decisions while they’re in college.
Track Your Income
The first tip is that college-bound kids need to become used to tracking income, expenses, and all their financial transactions. Parents have to help them create a budgeting system that’s easy to use and helps them build a habit of paying attention to how they’re spending their money.
Thankfully, there are many highly-rated apps like Quicken and mint.com that are built just for this purpose.
Create an Emergency Fund
The second thing that we want our kids to learn is how to build an emergency fund. Even though they have fewer financial emergencies to worry about during college, this is a skill that will be crucial for when they enter the real world.
While the emergency fund doesn’t have to be the commonly recommended amount of six months’ worth of expenses, it just needs to be something they can count on that is not a credit card.
Start Building Credit
Speaking of credit cards, the third and final tip is to get your kid one credit card with a low limit. Even though this sounds like counterintuitive advice, a credit card is a great opportunity for college freshmen to learn how credit works and build a credit score early in their lives.
If they finish college with four years of solid credit history during which they paid off everything on time and as agreed, they’ll begin their adult lives with a great credit score.