Major In Frugality
Sending the kids off to college is exciting and
scary all at the same time. You’re excited and hopeful that their
collegiate experience will be fantastic, enriching and rewarding. At
the same time you’re scared that your child’s undergrad experience
is also going to be fraught with mistakes and problems, particularly
when it comes to their finances. The cost of living, social
changes, and academic challenges of college can be a lot to
take on all at once. Here are three things that you can teach your
kids to ensure that they go out into the world with a stable financial
education on which to make their own decisions.
Credit Cards
1. When you use them well,
can be your best friends. When used properly, those first cards are
a fantastic way for your kids to build up their credit ratings. Encourage
them to use the cards regularly but to never ever charge more than they
can afford to pay off in a single month. If they do want to use the
card to buy something big, teach them to pay that off completely (and
by making more than the minimum payment each month—even $5 more can
make a huge difference) before buying something new.
1a. Teach your kids how
the interest rates on these cards work. They aren’t likely to get
a good rate when they get their first card; they have no credit rating
to back them up. But teach them how to negotiate a lower interest rate
after six months or so, when they will (hopefully) have a positive history
to back up their requests. Teach them to always research which credit cards to get and that keeping a close
eye on their interest rates is a good idea. That any hike in rate needs
to be addressed with the company.
Savings Accounts
2. Help them set up a
savings account. Emphasize that they need to find the best saving interest rates because that will help them out in the
long run. Teach them how compound interest (the rate most often offered
to savings accounts) works and why it is important to put money into
that account regularly—even if the amount is small, getting into the
habit of putting something aside will serve them well later on.
Clippings and Savings
3. Help your kids learn
how to shop for bargains on the things they need. Encourage them
to use coupons and deals whenever possible (but only if they are applicable)
and that buying generic isn’t “lame,” it’s often smart. Being
able to figure out what things actually cost and shopping the sales
will help them stretch their meager budgets as far as possible, which
is a habit that will serve them well even when they get out of school.
Your kids are going to
be facing a lot of peer pressure when they get to school—they’ll
feel the need to keep up with their dorm mates and fellow students.
Teaching them how to be financially responsible will help them better
deal with this pressure because they’ll know how to get the things
they need and things they want—without bankrupting themselves or ruining
their finances after they graduate and that is the best lesson of all.
