The mere words “off to college” and “credit cards” should give you goose bumps. The scary news is that half of all college kids have at least four credit cards and will graduate with over $4,000 of credit card debt and $20,000 in student loan debt. Not a great way to start out their career life! This debt load means that 18-24 year-olds will spend almost 30% of their monthly income solely on debt repayment.
Now for the good news! Most college students admit they need more financial management education — so teach them! The beginning of any financial arrangement is always a budget. Simply, a budget is a description of “Money In” and “Money Out.” As a parent, you have some control over the “Money In,” especially if you’re supplying it. But in most cases, your child will control spending the “Money Out.” Your overall goal is to start having “Money Management” become a real life skill. If you haven’t started money lessons yet, it’s never too late. I call this process my “No Magic Money Log”.
It’s no magic where your money went – you spent it. Have your kids carry file cards to write down everything they’ve spent money on. This way, they can really decide what they “need” as opposed to what they just “want”. Go through the list with your student and build a real budget. It should include things such as phones, Internet, food, entertainment, and transportation. Books and clothes may be one-time expenses and may not reoccur during the semester. Let them report their budget to you on a monthly basis. The more responsibility they have the more they’ll own their budget…and hopefully this will help you get a good night sleep.
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