Finance Tips to Help Your Teens Before Graduation

Parents Who Care Share Finance Tips Before Graduation

Teaching a few finance tips before graduation is a must, especially these days.  As parents, one of the driving goals is ensuring your kids hold the tools they need for the road ahead, no matter what it holds. You spend 18 or more years adding tools to their toolbox through training, guiding, correcting and empowering them to launch into adulthood.

However, if college is fast approaching, and there are no finance tools to be found in their “life toolbox,” kids can find themselves woefully unprepared for adult life, quickly falling into debt.

Unfortunately, that’s more than a hypothetically situation, but a bleak reality for thousands of college freshmen.

In a 2015 article for Market Watch, reporter Jillian Berman writes,“On average, freshmen at four-year colleges could only answer about two out of six questions correctly about topics like the right amount of money to set aside in case of a financial emergency, the conditions placed on student loan borrowers and how long a late payment remains on your credit history, according to a study released Thursday.” 

Berman continues, “The survey of 42,000 college freshmen, published by Higher One, a financial aid disbursement company, and EverFi, an education technology company, also found that just 39% of four-year college students use budgets and 12% don’t even check their account balances because it makes them nervous.”

They don’t check their balances because they’re scared to? Lesson No. 1 of adulthood: problems don’t disappear because you ignore them. The sooner your teens learn that, the better!

Before your kids head off to dorm life, here are some ways to add to their financial toolbox, and better equip them for the road ahead.budget-tips

Implement a Budget

One of the first ways you can help your teens be ready to manage their own finances is to explain the purpose of a budget and help them implement one on their own. Before you bemoan your own abuse or lack of use, of your own budget, look at this as a family learning opportunity. Even if it’s messy, you can learn together.

Put pen to paper (or Excel to use) and start by listing your teen’s income and expenses, current or expected. Don’t forget categories like savings, textbooks, and an emergency fund. Once it’s clear what part of their income is spoken for, what savings goal they have, and what amount is extra, it will help them become a part of their finances, rather than observer. Observers have no skin in the game. Once those dollars and cents are connected to real items like gas and food, all of a sudden they are players in the game, and more motivated to stay on budget.

Make Expectations Clear

Conflicting financial expectations can be a large source of contention between students and parents, even before they walk onto campus. In a way that works for your family and situation, make every effort to communicate clearly and often what (if any) financial responsibility is your part, which part is the students, and what is covered by loans or scholarships.

Also ensure any other expectations you personally put on them is clear. If you insist on a good education, but also insist they find a job and secure their own transportation, they may not be able to hold up all ends of that bargain. Grades may slip while they work too many hours.

They may be penalized at work, or even fired, for not showing up due to their school load. School is a full-time job, and students and their families need to allocate responsibilities accordingly

Helpful Resources 

There’s no shortage of resources that can add to your teen’s financial knowledge and understanding. Some helpful places to start are with books like “The 10-Year Turnaround,” by Matthew Paulson; “Simple Savings,” also by Matthew Paulson and Toi Williams; or “Rich Habits,” by Thomas Corley. These books have real-life stories and practical application tips that make personal finance seem accessible to teens looking to launch into adulthood.

The time is now to educate and equip our teens on the brink of college and career decisions. Without the proper finance tools and skills, students will be less likely to make informed decisions about scholarships, loans, and credit cards. They won’t be able to manage a small-scale budget as they work or go to school. And they won’t have a vision for the finances post-graduation.

But your teens don’t have to join the woeful financial stats of college students across the nation. You can help your kids make the transition from high school to college by fully equipping their financial toolbox and encouraging wise decisions, lots of research, and perseverance toward personal finance.

As parents, one of the driving goals is ensuring your kids hold the tools they need for the road ahead, no matter what it holds. You spend 18 or more years adding tools to their toolbox through training, guiding, correcting and empowering them to launch into adulthood.

However, if college is fast approaching, and there are no finance tools to be found in their “life toolbox,” kids can find themselves woefully unprepared for adult life, quickly falling into debt.

Following up on Part 1 of this post, this article we will explore some other areas to better prepare your teen for the financial responsibilities of college and beyond.

Explore Scholarships

Higher education comes with a high price tag. Even if college isn’t the direction your kid would like to go, trade schools still cost as well. The sticking point is who is going to pay for it?

While loans are an option, more and more graduates are finding themselves strapped with thousands of dollars of debt upon graduation, which they struggle to pay back as they launch their career.

scholarship-tipsScholarships provide funds for tuition, fees, and even books, and don’t have to be paid back. Depending on the scholarship, students may be required to complete projects, papers, or assessments that demonstrate their desire and willingness to be granted a scholarship.

While it’s more of a myth that there are thousands of unclaimed scholarships out there, the truth is there are many unique scholarships available to students who are diligent to apply, and show a desire and willingness to obtain the scholarship.

But what if my kids don’t have the highest grades in the class?

Scholarships are an invaluable resource in helping students go to college, but they’re not just limited to academic or athletic stars. There are numerous scholarships that are available to kids with a specific ethnicity, academic interests, or other unique skills.

It’s never too early to begin researching which scholarships are the best fit for your student, and begin compiling a resume, letters of recommendation and other info. Keep everything in one folder so it’s easy to reference as your teen applies for various scholarships.

When applying:

  • Help your teen to begin drafting a “resume” which details your student’s GPA, academic involvement, community service and other such items. A high school resume will be lean, but it helps students know how to represent themselves on paper, and will be great groundwork laid for college and beyond.
  • Gather a list of teachers, employers, and other people who would be willing to write letters of recommendation, as many applications require at least one, if not two letters.
  • Compile a calendar of application due dates so no deadlines slip by you.

Scholarships can also lead to making valuable connections on campus, which further contribute to academic success. Recipients of certain scholarships often work on projects or have certain classes together, and sometimes receive additional help and attention from faculty and staff.

It’s worth the extra work of applying and writing essays, if it means money in the bank, and no future loans to pay back. 

Explain the Pros & Cons of Credit

To the newbie adult, a credit card may just be another name for “free money.” But for the experienced adult, credit represents so much more. Good credit opens the door to quality housing, transportation, certain jobs, and other applications.

Bad credit only leads to high interest rates and more closed doors on jobs, loans, and cars. But all of that seems like a fairy tale to college freshmen with their own piece of plastic with their name on it.

Dispel the fairy tale, and level with your teenager on the pros and cons of credit. Don’t assume your teen knows what credit is. Take the time to explain the benefits of a credit card, but also the pitfalls.

If you decide as a family that it’s the right time to get your graduating student a credit card, clearly state expectations and limitations for the card. Show them where they can check their credit score, and also regularly check the balance.

Additional Resources

It’s important to cast the vision of being a life-long learner, especially when it comes to finances. Again, teaching financial tips before graduation will prove beneficial to you and your child.  If you are willing to learn and educate yourself, there’s less of a chance that you’ll find yourself in hole of debt that is near impossible to climb out of. From books, webinars, and podcasts, there’s no shortage of resources. A good podcast to check out is “Dollars and Sense,” along with “Smart Passive Income.”

For books, check out “The 10-Year Turnaround,” by Matthew Paulson; “Simple Savings,” also by Matthew Paulson and Toi Williams; or “Rich Habits,” by Thomas Corley. These books have real-life stories and practical application tips that make personal finance seem accessible to teens looking to launch into adulthood.

With diligence, teamwork, and the right knowledge, parents and students can face college financial obstacles of courage with confidence.

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