My family still gets a good laugh from the story of me asking how to tell which one was the dryer. My beloved Aunt Polly responded with the perfect gift—a laundry basket, detergent, two rolls of quarters, and a diagram! It saved my life, and thanks to my wife my son is already ahead of me in being prepared because he has had laundry practice.
In my job as a financial planner, I work with clients routinely on saving and funding strategies for how they will tackle the college cost problem. As a financial planner and a parent, it occurred to me recently there are a few things I might add for my college to-do list, and they have to do with making sure my child is financially prepared and protected beyond just how the tuition will be paid and how to do laundry. Here are a few to consider.
- Build a credit score. According to research, the average credit score for persons 18 to 25 years old is 630. This is not very good. Having a good credit score will be important for college graduates if they want to rent an apartment or buy a car. It is also possible that potential employers will review a candidate’s credit score.
There are many reasons why building and maintaining a good credit score are important, and yes, there are many ways a college student could wreck their credit. One of the simplest ways to build credit is have one credit card that you use and pay off every month. The operative words being “use” and “pay off.” Here is a link to a good article from The Simple Dollar about do’s and don’ts for building credit in college.
- Consider a power of attorney. This is an interesting subject. I am not an attorney nor am I giving legal advice; however, the issue warrants some consideration. When your child turns 18, they are legally an adult. This means parents are not granted access to information directly. There are many good articles on the subject. Here is an example from Forbes magazine and another from Financial Advisor Magazine if you want to read more.
It may seem out of place that you do not have access to information if you are paying the bills, but it can be the case. As a parent, the scenario which grabs my attention is the one involving the need to make medical decisions in the event of an accident or incapacitation. Each person and family must consider their situation, but this subject I plan to discuss with my children.
- Drip on their financial education/awareness. My father-in-law gets credit for raising my awareness on this one. My wife and I were dating in college, so I knew about the subscription to Money magazine he had purchased for her and her sister. He probably knew they mostly were great drink coasters in a college apartment, but the teaching point left an indelible mark. It doesn’t matter what you are studying. You need to take responsibility for your own future financially, and being well read and aware is the first step.
Make this concept fit for you. Magazine subscriptions may be out of favor in the digital age although I love the idea of my child getting a monthly “gift” from home even if they don’t read it cover to cover. Another idea is buying them a stocking stuffer book like Dave Ramsey’s The Total Money Makeover or The Intelligent Investor by Benjamin Graham. A quick Google search of top financial planning books will give you Christmas and birthday ideas to last way beyond graduation. Of course in 2018, the podcast world is forever expanding. I am not tech savvy enough to drip this on my millennial, but I am sure there is a way to do it. The point is that small nudges from home about the importance of money awareness may go a long way to making sure your baby graduates with a little more than just a degree.