Is your child going to be a freshman soon?
If yes, it is very important to make them aware of their finances right from this age! In today’s world, the concept of financial independence has gained immense importance.
You might have already tried, but failed due to a lack of proper planning and awareness.
Financial independence is a concept which is best implemented when you are young. Being a recent freshman, your child is at the right age of planning his/her financial independence!
But what is it exactly?
Being financially independent means you have enough income to pay for your living expenses for the rest of your life without grinding into a 9 to 5 job!
Your child might think that it’s a chimera! But, the key to financial success is being aware of how you are spending your money!
He/she might tend to buy the latest car available, expensive phones with costly services, eating out at lavish restaurants, and so on. All of these factors can make his/her life miserable, gradually into the debt burden!
So, as a responsible parent, you need to manage your teen and encourage him/her to achieve financial freedom for a stable life ahead! Here are some tips which you can follow to help your child in attaining financial freedom!
Talk about money
A 2017 T. Rowe Price survey reveals that about 69% of parents in our country said, they never had a talk with their children about the value of long-term investing, discussed market volatility, or showed them financial statements!
It doesn’t necessarily mean that you should schedule a 2-hour lecture or make a decorated presentation about your bank statements and investment plans!
Make them understand the basic concepts of saving, budgeting, paying down debt, etc. These are the pillars of a stable financial life!
Even if you are going through a financial failure, share with them honestly.
In fact you can share the ideas which you are going to implement to cope up with the failure!
Failure is success if we learn from it – Malcolm Forbes
Explain how to plan a budget
You should make your child know how important a budget is to his/her financial life and financial independence!
It will help them to make a habit of saving dollars. Sit down with him/her and help your child to list down all the basic expenses!
The biggest expense during college life would be the tuition costs.
If your child lives on-campus, then the cost of accommodation and meal plans will be counted.
If he/she lives off-campus, costs of rent, groceries, utilities will be included.
…In fact, you need to create a separate category for clothing, entertainment, transportation, and other expenses.
Then calculate your child’s income from all the sources. He/she can opt for a part-time job while studying! Then he/she can pay off the basic expenses from the pay check.
Otherwise, he/she can apply for federal scholarships to pay off the tuition costs.
If you have saved money for your child’s education, ask him/her to divide that money between the 4 years of college. Else, the last resort would be opting for student loans, which can be a setback for achieving financial freedom!
Then help your child to chalk out a realistic budget which will make a habit of saving, irrespective of the amount!
Initially, it will be quite tough for him/her to follow the budget strictly. But once he/she gets habituated, it can be a stepping stone to the achievement of his/her financial freedom!
Advise your child to become budget-savvy
- Save on transport expenses: If your child stays on-campus, this can be the biggest saving. Because the transportation cost will be zero. If he/she stays off-campus, buying a monthly pass for public transport can be a fruitful saving.
- Reduce accommodation costs: Your child can share the accommodation with the maximum number of permissible members. This way his/her share in the accommodation cost will get reduced a lot!
- Avoid paying account maintenance fee: Your child can opt for a checking account, especially designed for the students. Else, he/she will have to shell out a hefty amount to pay the account maintenance fee, if opted for a normal account.
- Stay healthy and wealthy: They can opt for meal plans in the college and can save almost $200 per semester. And if he/she can cook, then they can save more than the meal plans. It will help him/her to grow healthy food habits.
Embracing healthy habits always help whether it is about eating healthy food or leading a healthy financial life. So, even if they incur debt somehow, he/she can adopt healthy habits to clear debts and solve the problems fast.This is necessary for having a good financial future and to attain financial freedom!