Is your child financially ready?

As summer approaches, you may be getting ready to send your child off to college or approaching the last year of high school. You’re getting him ready for the real world and teaching him to say “no” to peer pressure – but is he ready for the financial real-world? There is much that can still be done to set your child up for a smooth financial transition, from life at-home to life on-campus.
Summer jobs
Mowing yards, babysitting and fast food jobs are typical teen employment opportunities, but more employers are looking to mentor high school talent for prized entry-level jobs. In fact, half of all employers are accepting applications from high school students for internships, or plan to this year – while nearly half of high school students are already participating in internships, according to a study by Millennial Branding, a Gen Y research and consulting firm.
Fully 60% of companies surveyed said that students should begin focusing on their careers while still in high school in order to gain a competitive advantage for future jobs. And a whopping 90% of the companies said that high school internship programs could help students get into better colleges.
A high school summer job can be more than just a way to put aside some money for college. It can be a resume-building, career-focused stepping stone for life during school – and after graduation.
Opening an account
It’s important to build money management skills early on, as well. That means opening a checking account, using a debit card and learning to track money coming in – and money going out. Look for an account that accepts a low opening balance, reasonable fees and broad ATM access (some financial institutions, including Texans, are part of an ATM network, giving your child access to literally thousands of ATMs across the country). And because digital natives rarely visit bank branches, mobile access and online bill payment services are must-haves.
The FDIC reports nearly 15% of young Americans, ages 18 to 25, incur an average of 10 or more overdrafts a year. Learning how to master cash flow and practicing prudent spending can be a big head start for young adults preparing to enter college, so finding an account with access to a free personal finance management tool, like FinanceWorks, can prove helpful.
The first credit card
The thought might make parents shudder, but high school students need to understand the pitfalls of rampant spending, and the power of healthy credit habits. The New York State Higher Education Services Corp. says that three out of four college-bound students are not ready to deal with the financial challenges ahead of them. As an example, nearly two thirds (62%) of final-year students have four or more credit cards, with a combined average of $4,100 of debt.
High school students can learn good spending habits by using a debit card drawn on their personal checking account, combined with the use of a product like FinanceWorks to teach them how to budget accordingly.
Finally, a responsible and time-tested teen can move to a full-fledged – but low credit limit – credit card, co-signed by the parents.
A smart strategy can help build a student’s credit history while setting them up for success later, when they’re on their own. Of course, with all advice comes the requisite disclaimer: each child’s capacity to handle credit varies, and close supervision initially is probably best.
Additionally, as your child gets closer to high school graduation, attending college fairs and reviewing college costs with him can help you gather information regarding financial aid and available scholarships so you both are prepared for life after senior year.
Spend time making memories while your child is still at home and enjoy the little moments – and along the way, ensure he’s financially prepared by discussing these specific topics. You’ll both find comfort and independence in knowing he’ll be absolutely fine in the real world.

As featured in Currents / eCurrents Spring 2014 edition

Hal Bundrick is a writer for NerdWallet, a personal finance website dedicated to helping consumers make smarter financial decisions.

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