Got one leaving the nest for college? Here's a financial checklist

Author: Hillary Stalker, CFP^®

^As your child prepares to leave the nest and head off to college, it’s an ideal time to help them build some critical financial skills. For most young people, going to college represents their first taste of true independence and money management responsibilities. Involving them in financial conversations and creating a structured plan can pay dividends down the road. So here’s a practical financial checklist to help ensure your soon-to-be freshman is well-prepared.

Budget as a family

Teaching your child to manage their finances starts with a solid budget. Sit down as a family to discuss income sources, expected expenses, and how to balance the two. Make sure they understand the fundamentals of budgeting and living within one’s means. Help your child categorize expenses into "needs" (essential for their basic living and education) and "wants" (lifestyle choices that can be adjusted or eliminated if necessary). Discuss the importance of an emergency fund and encourage setting aside a small portion of their income or allowance for unexpected expenses.

Emphasize the importance of tracking spending and sticking to the budget, and consider tools or apps that can help your child keep their finances on track. Learning to monitor and adjust spending in line with this budget can help avoid future debt troubles.

Encourage part-time work

Even if you can financially support your child through college, encouraging them to find part-time work can be beneficial. Working part-time helps students gain practical experience, build resumes, and form new friendships outside the classroom. It also instills a sense of responsibility and helps them appreciate the value of money.

Encourage your child to seek employment in areas that complement their studies or career aspirations. Campus jobs, for instance, can be particularly accommodating with flexible hours and proximity to classes. Regardless of the job, the experience will teach them about the world of work and provide a sense of achievement and independence.

Discuss credit wisely

It’s essential to have a conversation about credit. Discuss the dangers of impulsive credit decisions, such as opening a store credit card for a one-time discount. Explain how credit scores work and the long-term impacts of good versus poor credit management. It’s vital to teach them that misuse of credit can lead to a debt spiral that is difficult to escape and can damage their credit score severely.

Share personal anecdotes about credit – both good and bad. Your own experiences can provide real-life examples of the consequences of credit decisions. This can make the discussion more relatable and impactful.

Use this conversation to lay the groundwork for responsible credit use. Encourage them to start with a simple, low-limit credit card to build their credit history if they feel ready to manage it. Stress the importance of paying off the balance in full each month to avoid interest charges and build a positive credit record.

Open a student checking account

To promote financial independence and decision-making, have your student open their own checking account, but structure it to avoid issues. Many banks offer student accounts you can co-own and monitor, preventing banking fees and errors through overdraft protection transfers from your funds. These accounts typically have features tailored to students, such as minimal fees and overdraft protection, offering a balance between independence and safety. Mobile apps with purchase alerts can keep you both informed. 

Create a cyber-safe environment

With the increasing number of financial scams targeting students, it’s crucial to ensure your child’s financial accounts are secure. Begin by setting up multi-factor authentication (MFA), which requires more than one method of verification to access accounts, dramatically reducing the risk of unauthorized access. Enable transaction monitoring and set up alerts for any financial activities. These alerts can be sent to both your and your child's phone or email, providing immediate notification of any suspicious transactions.

Educate your child on the importance of strong, unique passwords for each account and the dangers of sharing these passwords. They should also be aware of the common tactics used by scammers, such as phishing emails or fake websites. Encouraging them to regularly review their financial statements and credit reports can further enhance their awareness and ability to spot inconsistencies that might indicate fraud.

Have annual discussions

Make it a habit to discuss financial aid, student loans, and scholarships every year. Circumstances can change annually, and keeping your child involved in these discussions will increase their awareness and responsibility toward their college finances. This ongoing conversation can also motivate them to seek out scholarships and understand the nuances of financial aid. If loans are inevitable, model different payoff scenarios so your child understands the true cost of borrowed funds plus interest over repayment periods.

Lay the groundwork

At CapWealth, we are committed to promoting financial literacy across all ages because we understand its critical role in securing your family’s financial future. Starting these conversations and implementing safeguards benefits both students and parents alike. Your child gains invaluable money management skills and financial ownership while you maintain appropriate oversight. The entire family develops healthy financial habits and transparency that pave the way for future success.

By following this checklist, you’ll help your child develop financial independence and security as they embark on their college journey. Remember, preparing them for the financial reality of college life is just as important as their academic readiness.

Hillary Stalker, CFP, is an executive vice president and financial adviser at CapWealth. For more information, visit capwealthgroup.com.

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