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Get Ready for FAFSA Season!Guest Contributor
Summer signals the beginning of a new life chapter for your college-bound student. As a supportive parent, you want to provide all the necessary tools to help them be happy and successful. As part of the plan to start them off right, shopping carts across the U.S. will be filled with dorm essentials like shower caddies and laundry baskets.
But there’s a different kind of preparation that many families don’t know how to tackle. It centers around lessons on how to manage money.
Unfortunately, many young adults haven’t had the benefit of taking a personal finance class. The truth is, whether your student has taken this type of class or not, money management is constant, and so the conversation around it should be ongoing.
Personal finance affects everyday life. From eating and sleeping (what do you eat, where will you sleep?), from before to after (before you take out student loans, after when they must be repaid), from more to less (when you have enough money to the times when you struggle to make ends meet).
For this reason, the sooner you start learning about personal finance, the better off you’ll be because it provides an important advantage: knowledge. I’m not talking about quantum physics-type knowledge. I’m talking about everyday life skills knowledge.
Financial literacy for your child can make the difference between building upon a good financial foundation from the start or learning from mistakes. It can help teens and young adults get through the ups and downs of life and provide a sense of security.
If you haven’t spoken to your kids about managing money, or if you’re avoiding the conversation, some words and emotions that come to mind might be: unprepared, scary, unnecessary, and awkward. If your family is among those that don’t have regular conversations about money, don’t feel bad. You’re not alone.
So, let’s figure out how to start and maintain these important discussions. Let’s face the uncomfortable and figure out how to get comfortable.
If you feel unprepared or awkward about having this conversation, let’s get you ready. There are many resources that can help. There are also different ways to have a conversation. If you don’t want to, you don’t have to talk about your own personal financial situation. You can point your young adult in the direction of an informative book or a reputable website like Mint or Bankrate.
Finding a good personal finance podcast is another avenue worth exploring. There are also blogs, apps, and articles. There are a variety of resources — choose wisely. Look for resources that are trustworthy and also compatible with how your student likes to take in information. For example, if their earbuds are always in and they'd rather listen than read, a personal finance podcast might be the best way for them to absorb useful information.
If you're frightened by the thought of having this type of conversation with your student, please don't be. I view it as an act of courage, especially if you plan to talk to them about your personal financial situation.
It’s courageous, to be honest with your kids. It’s courageous to be vulnerable enough to admit any of your own money mistakes, especially if it helps them learn valuable lessons. It’s courageous to let your kids see you as “only human,” facing the same trials and tribulations as everyone else.
Parents are trying to make it in this world, just like young adults. You may be in different phases of life, but, from a financial standpoint, in essence, we are all just striving for financial security. You may even find that your student respects you for talking about the good, the bad, and the ugly!
If you feel it's not necessary to talk to your kids about money, ask yourself why your child is going to college in the first place. My guess is that money is a partial motivator. The hope is that, once they graduate, they'll find a job that they'll find fulfilling while at the same time being able to comfortably pay the bills — a job that feeds their belly as well as their soul.
Having a plan for that future income can make the difference between starting off with a sound financial foundation or winging it. Winging it could mean having to deal with the consequences of mistakes later. Mismanaging money can cost you — literally. For example, you may have to repay debt with high-interest rates if you’re not careful.
Everything may not go according to plan because, let’s face it, that’s life. However, it’s better to think things through and at least create a plan. You can always adjust as needed.
Are you ready to help your student lay down a financial foundation? Here are some practical tips.
Have your student make a list of everything they spend their money on, how much is spent, and its frequency. For example, rent is a monthly expense, while getting a haircut maybe every other month. Credit card and bank statements can help fill in the blanks. Also, make note of all income.
If there isn't a long-term plan at the moment, then define short-term goals. It should always include setting aside some savings. Defining goals will allow your young adult to be more thoughtful and purposeful about what they're trying to achieve and how they plan on getting there.
Once they know their numbers and what they're working towards, creating a budget will help them get organized. It should be used as a plan to look forward. If income is $1,000 a month, what expenses will it cover, and how will that money be distributed? Decide how much should go towards food, living expenses, savings, and every other budget category.
Are they staying within budget? If not, they should make adjustments. Maybe they will need to cut expenses. Maybe they will need extra income. It's a working document that should be adjusted to meet their needs on an ongoing basis.
As a parent, you want what's best for your child. Teaching them how to create financial stability is a gift worth giving. If you really want to prepare your young adult for the future, introduce the subject of personal finance. It will benefit them every day!