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Money Check-up

By Judy McNary


In preparation for a summer trip to Brazil, my college-aged son acquired his first credit card. Up until then he hadn’t felt the need and wasn’t 100% certain he wanted the responsibility. One night we were talking and he said he had a question about how he was using the card. Would I mind answering? No need to ask me twice. This is music to my financial-planner ears!

Q: I’m using the card once or twice a week. After I buy something using the card, I transfer money from my checking account to pay for the purchase. Is this okay?

A: Yes! Just because the credit card company gives you a grace period to pay for purchases doesn’t mean you have to use it. This can be a nice way to get comfortable with the responsibility of making sure you have funds available to pay for what you buy. One of the best ways to stay financially sound and happy is to pay the credit card in full every month, if not sooner.

A little later in the conversation it was clear he was still thinking about the credit card. He brought up an additional issue:

Q: Is it alright if I pay a little extra if I know I’m going to use the card for something coming up?

A:  There is no harm in making a small overpayment on the card. It’s worth noting that some credit card companies even require a deposit for new cardholders with no previous credit history.

My son and I agreed it was good we had this check-in about finances. He got clarification on how to use the latest tool in his financial toolbox and I in turn received confirmation (and relief!) that he was using this new tool appropriately.

As our children reach adulthood chronologically, they also need to become adults financially. As a parent, you wield tremendous influence in this area. According to a study by Charles Schwab & Co., 56% of young adults cite parents as their primary resource for financial education while growing up and 43% continue to see them as the most important source of financial guidance after they are on 0their own. These results are consistent with findings by Wells Fargo and TD Ameritrade. Like it or not, they are looking to you to help them understand how to manage their money.

The summer after freshman or sophomore year is an ideal time to check in on their money maturity. They undoubtedly grew a lot this past year at college so find out where they are now. Start a conversation. Be willing to share a few of your past money blunders and you’ll be rewarded with a candid discussion that can help your college student understand how to manage money well.

Yes, you have a right to feel frustrated if you discover your student blew through too much money, took out credit cards, borrowed money, loaned money, or who-knows-what-else. But keep the dialogue open. The maxim in advertising is that we need to see or hear a message at least six times for it to stick — apply the same rule to messages about money. Though you may already have talked about it, be willing to start fresh on any topic. Help your student work through a budget to learn what worked and what didn’t. Discuss credit cards, student loans and other relevant financial topics.

These summer conversations do more than just set your student up for a successful return to college in the fall. Invest the time now and the payoff will be there long after their college days are behind them.

 

Judy McNary, CFP®, MBA, is a founding partner at Confluence Financial Advisors in Boulder, Colorado. Judy serves as a mentor through the Professional Mentorship Program at Leeds School of Business, University of Colorado Boulder, as well as the Alliance of Comprehensive Planners. She regularly contributes personal finance articles to publications including The Wall Street Journal, US News and World Report, Kiplinger's, and MONEY Magazine and was featured as a finance coach on “The Invested Life,” a web-based reality series produced by MSN Money. Her passion for counseling millennials on money matters led Judy to write Coin: The Irreverent Yet Practical Guide to Money Management for Recent College Graduates (visit her related blog: coininthebank.com). Judy and her husband have a daughter and twin sons. When not at work, Judy tries to be skiing, swimming, or scuba diving.

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