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Teach Financial Responsibility in High School

Suzanne Shaffer

As parents, we worry about our high school kids and their readiness for college. We watch them spend money like maniacs. We feel like an ATM and we wonder how on earth they will ever manage their money in college.

Will they accept multiple credit card offers and charge pizza and Starbucks daily? Will they spend all their work-study money on entertainment? Will they call us weekly and ask for more money to be deposited to their account?

Knowing how tempting it is to spend without keeping track of their spending, it’s important to make sure your teen knows how to handle their own money in college. Helping them understand money management is a key part of them gaining their independence. They should know how to earn money, create a budget, save, and spend wisely.

Here are seven tasks that will help teach your child financial independence before college.

1. Encourage Them to Get a Part-Time Job in High School

Working for someone else, earning a paycheck, and seeing Uncle Sam take a chunk of their hard-earned dollars will help your teen learn about money — quickly. And if they’re a self-starter, you might encourage them to start their own small business such as babysitting or mowing lawns.

Earning their own money also teaches them the value of hard work and helps them make smart choices about how to spend that hard-earned income.

2. Set Up a Financial Account

If your high school student doesn't already have a savings account at a brick-and-mortar bank, you can help them sign up on a digital banking platform like Chime or Greenlight, which allows them to control their finances from their laptop, tablet or mobile device. These platforms often have additional features that can help a teen be more financially responsible, such as automatic savings and fee-free overdraft protection.

Parents should have access to these accounts to help monitor their usage and add funds like allowance as necessary.

3. Develop a Budget

By helping your college-bound teen develop a budget, you ensure they'll be better prepared to manage their money and avoid overspending when they're living away from home with more freedom and less oversight. In college, your student is likely to have a limited amount of money each semester depending on what they’ve saved up, and if they have any type of financial aid or work-study income.

To prepare them for managing their money in college, review your teen’s income sources, such as allowances, monetary gifts, or a part-time job, as well as expenses, including spending money and savings. Have your teen subtract the expenses from the income and discuss the results.

It’s a good idea to discuss the differences between wants and needs. College students tend to spend large amounts of money on fast food, expensive coffee, smartphone apps and online shopping. Establishing a decision-making criterion before they spend will help when they are in control of their own finances.

Budgeting can be done on paper or your student can use one of the many online budgeting tools available.

4. Teach Them to Save

Teach them about having long-term saving goals. At this age, all they can probably talk about is getting a car or a new iPhone. Work with them on creating a plan for that goal: what they need to purchase an item and what they need to save. Early exposure to goal setting helps to give them patience and vision, two things they’ll need in life.

Teaching them to save now will create a pattern in their life that will benefit them when planning for large purchases after graduation like a car, a house and even retirement.

5. Discuss Credit and Debt

Before leaving for college, you should have a serious conversation about credit, debt and loans. Talk about the importance of a good credit score and what it takes to get and maintain a good credit score. Discuss the importance of making any payments they have on time and paying them off immediately instead of letting the debt pile up.

As college approaches, be sure to talk about student loans. Many college students accept student loans without understanding the repayment terms and the overall strain on a budget after graduation.

Explain that credit card companies tend to prey on college students by offering them a credit card, often with a high interest rate. If you feel a credit card is necessary, compare cards and explain the importance of paying the balance every month, or as quickly as possible.

Overall, knowledge about debt and loans will come with the added benefits of motivating them to be more financially independent. They may even work to find ways to avoid debt while in college, and in some cases, they might be able to start paying off loans while in college instead of waiting until after graduation.

6. Guide Them to Make Wise College Choices

Before starting the college search, you should have a talk with your teen about what your family can afford to pay for college and what you will expect them to contribute. The “money talk” is an important part of preparing your teen for college and discussing affordability.

When your teen contributes to the cost of their education, they will be more invested in their success. They will also learn valuable budgeting lessons that will stick with them past college and into adulthood. You’re doing your teen a disservice if you don’t involve them in the college financial discussions. They need to be active participants in the decisions and play an active part in paying for that high-cost college education.

In addition, choosing a college that is financially out of reach is a recipe for financial disaster. Many college debt disasters might have been avoided if parents had taken the time to have this difficult discussion with their teenager.

Don’t let your student walk across that stage at graduation and be clueless as to how to budget and be a financially responsible adult. It’s your job as a parent to prepare them for a financially stable future and that includes not purchasing something (like a college education) that is out of their financial reach.

7. Utilize Budgeting Apps

Since your teen is “all about the apps” for every task from shopping to communicating to entertainment, why not add a budgeting app to their smartphone? Budgeting apps make it easy to keep track of your money and get real-time balance information. A good budgeting app can help your teen keep track of their finances and find areas where they can cut expenses and save.

Good financial management is a habit your teen can establish during high school. The habit will carry on into college and after graduation if started early. You can help your teen establish this habit by discussing the importance of financial responsibility and modeling that behavior yourself.

Suzanne Shaffer counsels students and families through her blog, Parenting for College. Her advice has been featured in print and online on Huffington Post, Yahoo Finance, U.S. News College, TeenLife, Smart College Visit, Road2College and more.
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