Budgeting 101

Use these 3 tips to help your high school grad learn how to handle finances

College is the first time in many young people’s lives when they’re financially independent. And that makes parents worry! According to one study, college students are actually becoming less financially responsible.

Here’s what you can do to help your kids practice good money management while they are away at college:

Help create a budget. Knowing how much money is coming in and available for spending and saving is the key to avoiding overspending. Come up with a number based on what they’ve saved, what you’re contributing, and any financial aid money, then allocate the cash based on spending categories such as books, bills, transportation, necessities, and entertainment. Explain that books, bills, and necessities come first.

Give them some autonomy. Help them open a bank account with a debit card for purchases. Think about making it a joint account, so you can monitor spending until you’re both comfortable with them being on their own handling cash. If they run into trouble, be patient about letting them figure out why, and don’t offer an immediate bailout. Recovering from a setback is an important learning tool.

Teach about building credit. Getting a credit card can be an important step in their quest to become financially independent, but many young people initially abuse credit. Explain the importance of building a good credit score. Then show how credit cards are to be used responsibly as a way to develop a good credit score and build a good credit history.