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College is a major life change for parents and children alike. Students are getting their first taste of financial freedom, while parents are grappling with letting their children handle finances like adults.
As parents, it is understandable to worry over whether their children can pay for their college expenses and everyday spending. At the same time, parents want their children to develop sound financial habits as these college-bound students enter adulthood and gain financial independence.
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Here are some tips for parents to help their college-bound children manage their finances, ensuring a balance between financial freedom and parental oversight.
Setting up the right checking account
Student checking accounts from both brick-and-mortar and online banks tend to have no monthly fee and provide a high level of convenience for parents and students. Parents may prefer banks with branches at a student’s campus and close to home for fee-free ATM access. However, online banks often will refund ATM fees, allowing students to access any ATM without added cost.
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With the increasing reliance on online and mobile banking, students will probably use these platforms to monitor their spending, check their balance, and transfer money. At the same time, they allow parents to monitor account activity while the student is away from home. With shared access, parents can step in if they catch any concerning trends, such as frivolous spending.
Configure account notifications
Most banks allow users to set up alerts for various account events, such as when a large purchase is posted or the account balance falls below a certain amount. In such scenarios, parents can address possible overspending or act to replenish the account (or take the opportunity to teach or discuss budgeting strategies).
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Impose spending limits
Many banks allow accountholders to set spending limits, which can help parents minimize the likelihood of impulsive or unnecessary spending.
Depending on the balance, these limits can be enforced in different ways:
- Daily limits: The total daily spending cannot exceed a specific amount in a day.
- Transaction limits: The maximum amount per debit card transaction.
However, parents must share these limits with their children and explain the reasoning behind them. Sometimes, students may need to pay for many expenses – books and supplies at the start of the semester, for instance – and restrictive limits may affect their studies.
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Encouraging strong communication
Strong communication between parents and students is key to sound financial growth. Parents should have open and honest conversations with their children about money, budgeting, and the importance of financial responsibility.
Ideally, these conversations should not be one-sided lectures but rather dialogues in which students feel comfortable asking questions and sharing their concerns.
Additionally, regular check-ins can help ensure your child stays on track with their budget and makes smart financial decisions. Together, there may be opportunities to adjust spending limits, explore new financial tools, or even transition more control of the account to the student as they gain confidence in managing their money.
An open line of communication means parents can help their college-bound children develop strong financial habits that will last a lifetime. While it’s essential to provide guidance and oversight, students should be allowed to learn from their mistakes and grow into financially responsible adults.
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