As a family with two current Red Raiders and one West Texas A&M alumnus, financial conversations are a common occurrence in our home. We intentionally discussed money matters with our students early on, so they would learn to appreciate what they have and take ownership of their education and future financial well-being. While these conversations began far before college, it wasn’t until “launching from our nest” became a reality that all the previous discussions became personal to them. When preparing for college and completing the FAFSA, we openly shared an image of our savings and showed what our finances looked like to help assist in the cost of their education. This allowed them to see how they would need to participate in the expenses to achieve their educational goals. As the idea of living off campus seemed attractive to each of our students, zeroing in on their budgeting (or lack thereof) and cash flow became a priority. Paying bills, managing a bank account, and learning to save for special or unexpected expenses, as well as their future, are topics we frequently discuss today. Questions like “What does that look like financially?” and “What are realistic ways you can make that happen?”, or “If you say yes to this, what do you have to say no to?” enter our conversations. Challenges in spending inevitably occur. FOMO often overrides practicality. Grace sprinkled with the occasional “tough love” enriches our relationship. After all, we were once their age. We can’t forget that wisdom comes with experience, understanding, and right application.
College is not just a time for academic growth; it's also an opportunity to develop critical life skills, including managing money. Here are some practical steps to help your college student develop smart financial habits:
- Start with the Basics of Budgeting: Encourage your student to create a monthly budget that outlines income, expenses, and savings. Tools like budgeting apps can make this process easier and more engaging.
- Discuss Needs vs. Wants: Help them understand the difference between essentials (rent, groceries, and textbooks) and discretionary spending (dining out or entertainment). This awareness is key to managing finances wisely.
- Understand Student Loans: Student loans can be a significant financial commitment, and it's crucial for your college student to understand them fully. Discuss interest rates, repayment terms, and the importance of borrowing only what they truly need. Encourage them to explore scholarship opportunities, work-study programs, or part-time jobs to minimize borrowing. If they have loans, review repayment strategies and the benefits of paying off high-interest loans quickly. Financial Aid office has resources to help, and it is easy to schedule an appointment.
- Promote Saving Habits: Introduce the concept of “paying yourself first.” Regularly setting aside even small amounts can build a significant safety net over time due to the effects of compound interest. Encouraging the habit of giving to a non-profit, philanthropy, or a religious organization is also a healthy and rewarding habit.
- Encourage Financial Independence: Support their efforts to earn money through part-time jobs or internships. This not only builds financial responsibility but also enhances their resume.
- Introduce Investing Early: Share the basics of investing, such as the benefits of opening a Roth IRA (if they have earned income) or contributing to a retirement fund. It's never too early to learn about the power of growing wealth through investments.
- Explore Free or Inexpensive Budgeting Resources: Many tools are available to help college students manage their finances effectively without breaking the bank. Free budgeting apps can simplify tracking expenses and creating spending plans. Websites like NerdWallet offer free budget templates and financial advice. Your student’s bank likely has tools within its mobile app to help establish a budget and track spending habits.
- Utilize Texas Tech University's Red to Black Program: Red to Black® is Texas Tech’s financial well-being and literacy program that equips students and families with tools and resources to navigate finances confidently. They offer free, confidential and judgement-free financial coaching to students and families. This program covers topics such as creating spending plans, managing credit and debt, and ways to fund college costs. This is achieved through individual coaching sessions, group presentations, and outreach booths. It's an excellent resource for Texas Tech students and families looking to enhance their financial knowledge.
- Build Credit and Use Credit Cards Wisely: Building credit is an essential step for college students. Encourage them to start with a student credit card or a secured credit card, which are designed for individuals with limited credit history. These cards often have no annual fees, cashback rewards, and tools to track spending. Remind them to pay bills on time, keep credit utilization low, and avoid carrying a balance to establish a strong credit history.
- Lead by Example: Demonstrate good financial habits yourself, such as saving, budgeting, and spending wisely. Your behavior can be a powerful motivator.
By equipping your college students with financial literacy, you're not only empowering them for their time in college but also giving them the tools for lifelong success. Money management is a skill they'll thank you for in the years to come.
