Teaching your children to manage their finances is as important as teaching them to say the alphabet or tie their shoes. Money management should be an ongoing learning process that prepares children to begin managing finances on their own.
Cosign a Student Loan
One way to help set your kids to be successful is to cosign a student loan for them if you have excellent credit so they get better rates on a loan and can pursue an education. Most college students have not yet built the credit history required to obtain all the loans necessary to pay for their higher education. Obtaining student loans with a cosigner will allow your child to borrow more money and pay less interest over the term of the loan. These student loans can help your child pursue their educational goals while also allowing them to begin building credit in their own name.
Teach Them How to Manage a Budget
It’s never too early to begin teaching your children about budgeting and banking. Begin by helping them to manage allowances or money earned by doing odd jobs and chores. Take them to the bank with you and explain how different accounts work. If you feel comfortable, maybe share with them a bit about how your household budget works. Ask your young adult children to create a list of both their expenses and income. Then help them spot any gaps in their budget and discuss how they might address those gaps. Doing this will help them think critically about their overall financial picture and help them more successfully avoid financial pitfalls.
According to Ascent, “Making a budget can be a simple way to reduce stress and help develop good financial habits along the way.”
Teach Them How to Save and Invest
Saving money is a vital financial skill to master. Teaching your children to save at an early age will help build a natural financial habit. Take the time to help your student explore different savings options available to them and help them decide which best suits their needs. Your college student probably isn’t trying to invest in the stock market, but knowing how to make an informed decision about savings accounts and other investment options will make it easier for them to prepare for their future needs and goals.
Teach Them to be Frugal and Live Within Their Means
Living within your means is a vital lesson for young adults heading off to college. For many, this will be the first time they’re truly living on their own with some real measure of financial freedom. Unfortunately, many credit card companies and unscrupulous lenders will offer credit to students who may not fully understand the costs associated with that type of credit. Instilling in your children the importance of living within their financial means can help prevent them from falling into early and potentially crippling debt.
A foundation of financial literacy and responsibility will help your child establish a bright financial future in which they can achieve their dreams.