Financial Planning 101:
Before Your Child Leaves the Nest
Tomorrow is National Decision Day, the deadline for high school seniors to commit to the college they’ll attend. If you’ve been through this stage with your child already, you know it’s a time of excitement and change. And, if you have younger children who are not quite there yet, ask any parent whose children are – it happens in the blink of an eye.
Before you find yourself packing up the minivan and kissing your child goodbye, be sure he or she learns the basics of managing finances in college, including:
• Setting budgets and spending limits. Talk to your child about anticipated expenses such as books, entertainment, incidentals, insurance and big-ticket or unexpected items. Brainstorm ways to save, such as buying used books or renting them and being a smart consumer. Discuss weekly and monthly budgets, so your child has a sense of how much is appropriate to spend each month and a plan for when the budget is exceeded (for example, a part-time job to pay for spring break).
• Responsible credit card usage. A credit card can help a student build up credit history, provided it’s used responsibly. Before you agree to be a cosigner (typically a necessity for applicants under 21 years old) have a conversation about the significant cost of credit card debt. Inform your child it would take about 19 years to pay off a $5,500 balance when making minimum payments of $25 per month.
• Keeping their money safe. Review ways to keep your child’s online accounts secure, such as using strong passwords and not giving out personal financial information.
• Saving and investing toward financial goals. Many teenagers live in the moment, so it can be helpful to provide perspective. Encourage your child to save a portion of part-time or summer earnings toward future goals, including after graduation and beyond.
If you’re interested in learning more about helping your child become financially ready to leave the nest, contact your Luma Wealth advisor for additional information.