Kids on Campus
One of the most important roles you can play in preparing your kids for the lives ahead of them is to send them off to college with a strong personal finance foundation. Whether they're already in school or on their way soon, there are many things you can teach them about battling money peer pressure, cash management, and investing that will help them emerge from college with a sound financial frame of reference and the tools to help them build families and careers. If college applications are still in the future, include your child in the planning around her college nest egg, family gifts, and the asset allocation of her portfolios.
Building on Earlier Lessons
If you started your kids on an allowance when they were in grade school, this is the time to up the ante by having them contribute some of their allowance or their wages from a job to their education costs. Have them set up two online money market accounts with direct deposit from their paycheck or your allowance account. Treat one account as the college expense account and make the other a current expense account. This way — just as you would set aside money for a future household or family expense — you've planted the realization that part of each paycheck is allotted to paying current expenses and part to future ones.
Don't encourage your child to set up his dorm room to look like a photo from the college catalog. Shoot low on the economic scale and spend for the basics. Take advantage of the starving student stereotype, though starvation won't be an actual hazard, and let your kid start his college adventure with a focus on education, and without spending beyond his means.
Once the first semester of college starts, sit down with your youngster to plan the budget for the money in his college account according to the number of weeks in the semester. Most money market accounts will let you set up an automatic funds transfer so that each week — or every other week, as your student finds most convenient — an amount can be transferred into a checking account to pay for expenses. Have the student withdraw the cash each week to cover the expenses you have budgeted for.
Choosing the School
The process of choosing a school is the perfect time to teach strong personal finance lessons. One of the most important is: Don't waste the college savings by sending your student to a high-tuition school until they're sure what they want to study. Too often, parents will automatically start their kids at the school from which they ultimately hope they'll earn their diploma, without considering a less-expensive state school or community college for freshman credits. If the student isn't ready to declare her course of study, she might be frustrated by the pressure. What's worse, you've missed the chance to demonstrate deliberate and foresighted spending by frittering away more of the limited college fund on the first two semesters than was really needed.