(This is a guest article by Gary Foss*)
Often when a child leaves to enter further education, they will not have had to budget or manage their own money before. This can be quite a shock to the system and some young adults will deal with this more responsibly then others. Unfortunately, some will leave with considerably more debt than others. In many cases, this will be because the temptations of having money are all too much.
Many parents may not be able to help their children by providing money and helping to pay for their education and, for this reason, there is a lot that parents can do to help build their child’s financial independence before they leave.
1) Teach Them to Become Financially Independent
One of the best things that you can do is to encourage your child to save their money from an early age and to see and enjoy the benefits of saving. Often this will also result in the child feeling less inclined to spend their money in one go or on items that they do not really need.
It can be a good idea to encourage your child to have a small job when they are old enough, as again, this teaches them responsibility for their own money. It will also further reinforce the idea of saving and hopefully they will take pride in being able to manage their finances independently.
2) Point them in the right direction to fund their education
There are a number of ways to find money for education these days. Help your son or daughter identify these avenues:
a) Student Loans – Government student loans are the standard way to acquire money for your education. If you or your child have enough to pay for their schooling then you might not even need to go this route.
b) Scholorships & Bursaries – Most colleges and universities in North America offer a vast array of scholorships and bursaries that you can apply for. There are a number of resources on the internet and your school will be able to point you in the right direction for these as well.
c) Family Assistance – Often a relative will be willing to put up a portion of a student’s education to help them cover the costs. This is not always possible but it certainly helps your child get a head start on the financial planning that goes along with eduction.
d) Commerical debt – Tell your children to avoid this type of education funding as it can be the most expensive and dangerous. If you are very diligent you can take advantage of commercial debt for education but it is a risk that may not be worth pursuing.
3) Help them stay on top of their finance
You may also find that suggesting they keep track of all their income and expenses will teach them how to budget their money, which is an essential skill for the future. Once your child has begun full-time education it is advisable to sit with them and establish some form of budget.
This could be simply working out how much money they have per week and then taking out only this amount from the cash machine to avoid overspending. Something like this can really make a difference to how much debt they will have when they eventually leave. You should also advise against obtaining store and credit cards as these can provide too much temptation and cause them to accumulate debt.
4) Encourage them to get a part-time job
Some students don’t have the time or the energy to pick up a part time job on top of their studies but many can and should. If it’s possible, encourage your children to get a part-time job or even a full-time job during the summer vacation from school.
A job will give them a chance to earn a bit of money to go towards their education but it will also give them a sense of how much things actually cost. A student that never works doesn’t understand the costs of their education and the things that come along with it (Ie. housing, food, clothing etc.)
5) Help them if they’re having trouble
Lastly, you should always encourage your child to talk to either yourself or someone in a relevant department at their University or college if they do find they are struggling with their finances. Often, students will struggle on and get themselves into even more debt because they did not want to admit that they could not cope.
You might also need to bail them out by lending them money to cover their education debts – you obviously want your child to be able to stand on their own two feet but sometimes they might need your help to save them from financial disaster.
*About the author: This is a guest article by Gary Foss from SIPPS.org.uk - personal pension and finance specialists.
*Image Credit: Photograph by upsuportsmouth [via Flickr Creative Commons]