GOLDEN VALLEY, Minn. - With school almost back in session, now's the time of year when parents start prepping their college-bound teens for life away from the nest.
A crash course on laundry? Check. But what about money? Most college-bound teens are not taught the necessary money management basics like budgeting, saving, spending responsibly and staying out of debt.
Dan Ament, Financial Advisor with The Ament Group at Morgan Stanley Smith Barney in Wayzata, Minn, joined KARE 11 Sunrise to talk about ways you can prep your college student financially.
Managing money - According to a recent ING DIRECT survey, only 17% of teens say that they know how to manage money. In addition, more kids drop out of college due to debt rather than academics. A teen's fiscal irresponsibility can have a profound impact on the rest of his or her life.
Make a budget - It's not easy staying fiscally responsible in college. Between school necessities and late-night munchie sessions, the money flow can drain faster than you can say "maxed-out student loan". Making a budget (and more importantly, sticking to it) can help rein in the out-of-control spending - but the key is to make it feasible. Outline how much your student has coming in per month, subtract what absolutely needs to come out (rent checks, car payments, etc.) and the rest is disposable income.
Open a checking account - If they didn't have one in high-school, opening a checking account and learning how to manage money is an integral part of the college experience. The reality is that 1 in 4 teens think that when they use a debit card, they're borrowing money from the bank, rather than using their own. Opening a checking account and using a debit card can teach teens the ins-and-outs of plastic without the risk of running up huge debt. It's like taking a dip in a fiscal baby pool before jumping headfirst into the financial deep end.
Get the credit in check - After they've learned how to use their debit card, encourage your teen not to jump at the first credit card offer they receive. It's important that at some point during college they start establishing a positive credit history, but don't rush into it. Help them shop around and try to find a card that has low-interest and no annual fees, or offers rewards or points. Start with a low limit and stress that a credit card isn't free money - students should only charge what they're comfortably able to pay off at the end of each month.
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