When teenagers go off to college, they begin a new chapter of their lives filled with opportunities, independence, and challenges. Among the challenges is increased financial responsibility, from credit cards to student loans to rent, utilities, and food budgets. It is all too easy for unprepared students to end up in financial trouble.

The financial landscape for many college students is more complex than in the past. Tuition and the cost of living are higher than ever. And “school supplies” now include computers, cell phones, and other digital devices. Another important change is that people under 21 can no longer get credit cards without an adult co-signer, unless they prove that they can pay the bills themselves. On one hand, this potentially removes a significant source of temptation. On the other, credit cards can be very convenient when used wisely. And your child will need to learn to deal with credit sooner or later.

Other things haven’t changed. There are still endless temptations, and some students still want to match the standard of living of age peers who have the latest and greatest “stuff.”  

Here are some ways you can help your young adult navigate these financial pitfalls.

• Establish the basics with your teenager, including what you will pay for, what will be paid for with loans, how much spending money he will have, how many hours she needs to work each week, and so on.

• Remember that the campus bookstore of today probably offers a lot more temptation than in years past: many stock impressive selections of snack foods, clothing, accessories, gift items, and other “non-essentials.” Make sure your youngster is clear on spending limits.

• Teach your teenager how to read credit card offers—particularly the small print.

• Explain how small amounts charged can turn into large amounts owed. For instance, say someone owes $1,000 (or roughly a year’s worth of charging $20 a week). This may not seem like much money, however, at 18% interest and paying only the minimum each month, it will take over 13 years to pay off that debt—and the person will pay almost $1,400 in interest! In other words, each $20 night out charged on a credit card will actually end up costing $48.

• Teach your teenager that credit cards are for emergencies only. If he needs a card for convenience, consider setting up a debit card on his checking account instead.

• Suggest to your teen that she actually save money each week, even if it is only a small sum. As little as $10 a week over four years will give your teen a nest egg that might go toward a security deposit on an apartment or a work wardrobe after graduation.

• Teach your teen how to spend less in general. This includes limiting meals out, using coupons, and looking for bargains. The web is an amazing source of discounts: a search for, say, “Barnes & Noble coupons” or “Amtrak discount” will often turn up significant savings.

• When it comes to flying home for holidays and other travel, explain the importance of planning the dates in advance in order to get significantly better airfares. And make sure your teen compares prices among student travel organizations and other discount travel outlets.

Perhaps the most important thing you can teach your teen is that a person’s value is not based on the amount of money he or she has or the value of what he or she owns.  Money is simply an important—and limited—tool to be used wisely. And remember that you are your teen’s most important role model for financial management.

© Harris, Rothenberg International, Inc.

Reviewed 07/10