There are probably several things that you are feeling nervous about if your child is just about to go off to college, but making sure they know how to manage their money is definitely a big one. If they don’t, then they could put themselves in debt or destroy their credit in no time. Here are 5 money lessons your kids should learn before college.
- Set Aside Money for Savings
A lot of college students live solely on the money in their checking account and never actually commit to putting some money in their savings account. If you’re living on a shoestring budget, it can seem impossible to save money, but that’s even more of a reason why you have to put some aside immediately. Most banks can even automatically put a small amount of money in your savings account every time you deposit a paycheck so that you never have to think about it.
- Carry a Bit of Cash
These days almost every business accepts debit and credit cards, but some mom and pop shops that are found near campus might be cash only. Plus, you never know when you might be in a bind and need a little bit of cash. When this does happen, it can be very easy to lose a lot of money to ATM fees. One important lesson that everybody should learn is that keeping at least $20 on you at all times can really save you a lot of money in the long run.
- Don’t Assume You Can Afford Something Before You Buy
Most people, especially young people, like to think that they have a lot of money the moment that they deposit their paycheck. Unfortunately, most people get paid right around the time that they have to pay all of their bills. In consequence, they tend to spend a bunch of money the day they get paid, and then they have to pay a bunch of bills in the next couple of days, leaving them broke for the next couple of weeks. That’s why you should always assume that you have at least 30% less money than what you see in your account balance.
- Never Spend More Than 20% of Your Credit Limit
If you give your child a credit card, or if they have their own credit card, it’s important that they know that they should never spend more than 20% of their credit limit. Once you spend more than that, your credit score will really suffer. It may not drop significantly, but it also won’t be growing either. That’s why you always want to make sure that you are only using a credit card in emergency situations, or for very small purchases that you can pay off at the end of the month.
- Pay Your Credit Card Bill in Full
It doesn’t matter if you’re studying economics at Purdue, or earning Marylhurst’s masters in sustainability, you should know that your credit card bill should always be paid in full at the end of the month. It can be pretty tempting to see that minimum payment option and only pay that, but if you fall into that trap you will be paying interest for years.