Preparing your college student for financial freedom

The graduation parties are over, the photos have been shared and the thank-you notes have been mailed.

Now parents are looking to the next challenge — sending kids off to college. It is a time of excitement as the child you have nurtured for 18 years starts a new chapter, but there is also a degree of uncertainty — especially surrounding the issue of money management. You are right to be concerned.

While the Credit Card Accountability, Responsibility and Disclosure Act of 2009 limited how college students can be approached by credit card companies, it did not stop them.

In fact, college-affiliated credit card use remains steady today. Your best line of defense is to ensure your college student understands how credit works and how the misuse of credit can affect him or her for years to come. You can’t keep them from signing on the dotted line, but you can influence the way they think about the future.

Student loan debt is another concern. 71 percent of students take out loans and graduate with an average of $30,000 in debt. While loans can assist a student with reaching his educational goals, it can also have an adverse effect on financial well-being far into the future. A survey from the National Association of Realtors found that 77 percent of people cite student loans as a primary obstacle to homeownership.

The best way for parents to help a child navigate the funding of their education is to make a detailed plan. Will you be funding everything? Will your child be responsible for any part of the expenses? Does he or she qualify for any scholarships or any grants that do not have to be repaid? If student loans are a must, ensure your child understands the ramifications and the importance of borrowing only what is needed for school.

Most of us look back on our college days as a time of ramen noodles and dorm-made book shelves, not about budgeting and saving for the future. Yet today, the fastest growing group of bankruptcy filers in the United States is young adults under the age of 25. Now is the time to sit down with your student and discuss the budgeting and saving process, no matter what their level of income. Determine who will cover which expenses and then stick to it. You never want to deposit money into an account for your child without giving clear direction on how it should be spent.

Finally, look for ways to help your student simplify their money management. Sign them up for electronic statements and teach them how to use your institution’s online banking system. By taking the time to prepare and opening up lines of communication, you can help make the transition to adulthood a smooth one.

John Lancaster is president and CEO of First Freedom Bank, a full-service community bank with headquarters in Wilson County.