At Compass Catholic our goal is to teach financial principles from the Bible so people are freed from the secular grasp of our culture. Luke 16:11 states “If therefore you have not been faithful with worldly wealth, who will entrust you with true wealth.”
This quote from Luke applies to your young adult who is heading off to college this fall. Have you taught them to be faithful in using worldly wealth? It is important for mom and dad to send that young person off into the world with some basic financial knowledge, so they can become faithful using worldly wealth. This is especially vital if your young adult has not been managing their own money and has no concept of using a budget, or paying their own bills.
One of the first discussions that needs to occur between the parents and student is “Who is paying for what?” Will the parents pay the entire tuition bill or is the student expected to contribute? Will the student provide their own spending money from a job? Are mom and dad providing spending money? How much and how often?
If you are providing spending money and your student has not been managing their own budget, think about making a deposit into their account weekly, so they can learn to manage a small amount at a time. Giving a young adult a semester’s worth of spending money can be a recipe for disaster if they do not know how to manage it. A great tip I read recently said to deposit the money into their account on a Monday so they have to manage the money during the week in order to have enough money to do something fun over the weekend.
If you are providing all the money for college, what do you expect from your student as far as financial accountability? Do you want to review their bank account weekly? Monthly? Quarterly? Or do they have an open checkbook to spend whatever they want?
This is also a great time to teach them how small spending habits can have long-term impacts, because little indulgences add up fast. Buying a fancy coffee every day means spending about $25/week or $100/month or $1,000/year. Extrapolate that over a lifetime and it adds up to a significant chunk of change. Buying a meal ticket and also eating at restaurants can mean spending twice as much money on meals. Discussing some of these points with them will help them think about the impact of their spending.
Decide if you going to give them a credit card and define the rules around using it. In case of an emergency a credit card is not a bad idea as long as rules are established and agreed to. Does credit card spending need to be pre-approved by mom and dad or can it be used to buy pizza for everyone on the dorm floor?
Using a ‘Secured Credit Card’ will help your student to learn how to manage money as well as establish their credit history. It’s a type of credit card that is backed by a savings account. The money deposited and held in an account establishes the credit limit on the card.
Interestingly enough, according to Money magazine, 63% of Millennials don’t use credit cards. In the long run, it’s probably best that Millennials are shying away from credit cards. They have seen the damage it can do to a household budget and they are fearful of adding extra debt to already heavy student loans. But there are risks involved with debit cards—if the card and pin number are stolen the account can be cleaned out quickly, (which is another good reason for mom and dad to make weekly deposits to their student’s account.)
Going to college, living away from home for the first time, being surrounded by peer pressure and learning how to manage money all at the same time can be overwhelming to a young person. It is important for your student to know they can go to you for Godly counsel in financial situations. The more you do to prepare them to manage their own money, the more likely it is that they will call you for advice. It’s amazing how you will get smarter as they grow older and more independent. Proverbs 12:15 tells us, “The way of fools is right in their own eyes, but those who listen to advice are the wise.” Give them good advice and watch them fly!
It is exciting to see your children grow into responsible adults. It is also important to help them do it by giving them responsibilities, and holding them accountable.
And the most important part of financial training is to teach them God’s way of handling money. It will serve them well in college and in all the years beyond.