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10 tips to help teens ace their college finances

With so much emphasis on how to pay for college, the more immediate financial question of how college students handle their personal finances is sometimes overlooked. But the college years are a critical transition to adulthood, and the habits they build now can set them up for smoother sailing after graduation.

They might be moving away from home, but older adolescents don't always make the most mature decisions. View this time as an opportunity for them to practice the personal finance skills they'll need in the future, while helping them avoid the consequences of poor money decisions.

Here's how parents can help their college kids organize their financial life.

1. Set up a bank account

Kids going off to college need their own checking accounts. To make it easier to help them out if necessary, consider using your bank and linking your account to theirs. Look for an account with no-fee options, an extensive ATM network, and no minimum balance requirements. Overdraft protection is also an option, but be sure they understand that fees might be levied if they use this service.

2. Incorporate technology

Between online banking and mobile budgeting apps, there's plenty of tech to help your teen with their money. Online banking enables them to check their balances, transfer money between checking and savings accounts, and, in some cases, deposit checks remotely. Mobile apps help track spending, remind users of upcoming bills, and offer a single hub for all financial transactions.

3. Get them a prepaid card

Prepaid cards typically are not connected to a bank account, which means there's no threat of overdrawing the account. When the money is gone, it's gone. This gives your kid the convenience of a card without the worry of costly overdraft fees or the interest charges that come with credit cards.

4. Guide them toward better spending

The opportunities that come with college life can be exhilarating – and expensive. Your college student might  have trouble resisting nights out, new clothes, or fun spring break trips. Talk with them about making wise spending decisions. With a student ID, they can score discounts on computers, movies, rail travel, and much more. Go over the costs of taking a car to school, living in a fancier apartment, and springing for the most comprehensive meal plan. They don't have to spend a lot to have a fulfilling college experience.

5. Consider Part-Time employment

Part-time jobs are often relatively easy to find on college campuses, so if they didn't already have a part-time gig, this is a good time for your teen to get used to having a job and balancing responsibilities. If working while attending classes is too much of a load, encourage them to work during the summer. Even a weekend or nights-only job will get them accustomed to the demands of the working life, and it lets them experience the pleasure of bringing in their own income.

6. Sing The praises of saving Money

Establishing a savings habit can prepare your teen for later, when they might be juggling mortgage payments with saving for retirement. Explain to them that it's less important how much they save  — even $10 per paycheck is a good start. During the college years, the idea is to train themselves to set aside a portion of their income for a future purchase or emergency.

7. Begin to Build Credit

When it comes to credit cards for your college kid, you need to walk a fine line. You don't want them to run up large balances on cards that will burden them with high-interest payments for months or years to come. On the other hand, if they don't have a card at all, they might not establish a credit history. This can make it challenging when they apply for a car loan or attempt some other type of borrowing after graduation. One way around this is to put them on your credit card as an authorized user. That way, they can build credit while having your oversight to keep them out of trouble.

8. Start paying off student loans

With more than half of U.S. college students taking on debt to pay for their education, chances are your teen will, too. Although the prospect of paying off thousands of dollars is scary, it also gives you a chance to explain the importance of getting a head start on paying off interest-bearing accounts. The more they can pay off interest during college, the less they'll have to pay while managing a full-time job and higher living expenses.

9. Plan for emergencies

Accidents happen. So do car repairs, unplanned trips back home, and textbooks that cost more than expected. Just as an emergency fund is an important part of adult personal finance, it's a smart addition to the college student's assets as well. If you don't have enough to cover such a fund for your child, suggest they set aside at least $500 of their income from a summer or part-time job.

10. Be prepared to help

You no longer need to make them dinner or drive them to soccer practice, but your teen still needs you. Understand that at some point during their college years, they will probably face a financial challenge (or two) that will require a helping hand from mom and dad. If you have linked bank accounts, you can transfer money from yours to theirs. Or use a peer-to-peer payment service, which lets you transfer money by mobile app even if you don't have a linked bank account.

The Bottom Line 

While financial skills may not be considered official coursework, they're absolutely required for life after graduation. College is the perfect time to encourage your kids to learn, and practice, financial responsibility.