College students should be armed with financial advice

College is a time to engage in new experiences and personal growth. It is the first time most kids are living away from home and free to make their own choices. As parents, we tend to enforce the importance of making good academic and social choices, but we also need to discuss financial choices.

 

Living away from home requires kids to figure out when and what to eat, how much to spend at weekend parties, or whether they can afford the trip to the big away football game. College is the perfect time for kids to learn about making sound financial choices. Here are tips to share with your college students:

 

Loans

Most graduates will leave school with debt. They should be aware of exactly what this looks like.  Will they be responsible for $250 per month or $1,000 a month student loan repayment?  It is easy for kids to gain access to student loans, but we do them a great disservice if we don’t explain the decade’s long consequences of those decisions.  

 

Ask: What does an extra semester cost in terms of future repayments? Will my current major and its future job prospects provide enough income for me to pay back the loan and support myself?  

 

According to Forbes, the average salaries for graduates in 2022 range from $55,000-$75,000. A rule of thumb is to keep student debt below 10% of monthly take-home income. 

 

Create a budget

No matter how rudimentary, kids should have a budget. They should know how much they spend and where they spend it.  

 

This sounds so simple, but most kids have never been fully responsible for funding their bank account or accountable for their spending. This is a great introduction. Ask them to create a monthly budget for food (outside of the meal plan), clothes, gas, entertainment and an emergency fund.  

 

Whether parents are funding their accounts or students are working to fund their needs, a budget creates awareness and is a life-long tool for financial success. They can use apps like Mint or YNAB to monitor their spending.  Each month, they can review their spending habits and patterns. They will blow through their budget more often than not, but this is a time to learn, experiment, and refine.  

 

Protect your Children

Under the law, your college student is an adult. This means that you no longer have the same access to their financial and health information. In order to properly help your child if issues arise, consider obtaining the following documentation:

 

Academic Information: The Family Education Rights and Privacy Act waiver gives you access to your child’s academic information.

 

Health Care Information: HIPAA Authorization grants you access to your child’s medical records. 

 

Health Care Decisions: Medical Power of Attorney grants the parent as an agent to make medical decisions on behalf of the child if the child is unable to do so on their own.

 

Financial Decisions: Durable or Financial Power of Attorney grants the parent as an agent to make financial decisions on behalf of the child if the child is unable to do so on their own.

 

You can work with your estate planning attorney to create this suite of documents. 

 

Financial education is not designed to scare students or cause anxiety about their college experience, it is simply to help them engage in higher thinking when it comes not only to their field of study, but also their financial decisions. 

 

 

Charleston Investment Advisors, LLC is a Registered Investment Advisor. The contents of this article should not be construed as investment advice. For more info: smackara@charlestonia.com.