For many teenagers, college is where they first experience money management alone. But many of them are ill-prepared. According to a study by Ohio State University, 70% of college students are stressed about their finances. And experts warn that this challenge can force many to reduce their class load, take a break, or even quit their studies. So, if your teenagers are joining college, it's wise to prepare them financially. The best way to do that is by learning from other students' mistakes. The most common money management mistakes include:
Not Tracking Their Money
Read any content on how to become a millionaire and you will see "control your spending" in the list of tips. Overspending is a huge problem that many people face at one time or another, and college students, especially freshmen, are no exception.
It's not uncommon to see freshmen spending all their college savings in their first few weeks in college. Financial experts say the best way to overcome this challenge is by creating a spending plan. So help your teen do exactly that.
Have an honest conversation with them. Have them write their income and expected expenses. Encourage them to always live within their means by knowing where their money is going.
Not Having Financial Goals Creates Money Management Mistakes
Many students don't have a plan for their money which is one of the huge money management mistakes. And while creating a spending plan is helpful, it may not help them achieve long-term objectives. There are things that you wanted out of life in college. Perhaps you wanted to go on a study abroad trip, graduate with little debt, or have enough emergency funds.
Whether you achieved them or not, it's time to help your teens thrive in college. Let them write down their goals as opposed to just saying or thinking about what to do with their money. Research shows that writing down goals makes them more permanent. It will help your teenagers remember and work towards achieving them.
Not Distinguishing Wants vs Needs
Although it may sound basic, many college students make impulse purchases because they haven't or can't distinguish between needs and wants. Take, for instance, students who flock to Starbucks in the morning for a latte.
Rather than spending lots of money every day, they should simply choose inexpensive alternatives like brewing their coffee at home. Sobering, right?
Have a discussion on wants vs needs with your teen. It will help them save more money, avoid impulse purchases and reduce their chances of overspending.
Yielding to Peer Pressure
Peer pressure is a constant challenge in college and creates money management mistakes. And teenagers can easily succumb to it to feel good or to have a sense of belonging. And it can lead to costly financial mistakes like racking up debt to keep up with the Joneses.
If you don't want your kid to be one of them, teach them to understand that it's OK to say no. Let them see that they don't need to go out every evening, on a trip, or to the movies when they don't have money on their budget. Advise them to focus on what they want out of life in college to make good financial choices.
Not Finding a Part-Time Job
If you don't have enough money to get your teens through college, advise them to get a part-time job. Apart from teaching them to be responsible, part-time jobs prepare your child for life after college.
The last thing you want is for your teen to take on more debts to get through college when they can meet their day-to-day expenses with earnings from part-time gigs.
Avoid These Money Management Mistakes
Many teens learn to manage their finances alone for the first time in college. And without a solid foundation, they can easily make these mistakes. Don't let your teen be the next one. Use these tips to prepare him/her for college. Good luck!