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Ages 18-22 – The College Years

Earlier lessons put to the test

Here are 6 links to help your young adult cope with independence. Your child is out on his or her own, meeting new people and becoming more of an individual with each passing day. Here's where your lessons about managing money will be tested for real. Mistakes with money and credit can be big and begin to matter now.

The dangers of credit cards

College freshmen are literally swamped with credit card offers and enticed by sign-up premiums in the first week on campus. Students can easily acquire multiple new cards. Maxing-out one card and simply moving on to the next is easy. The sad truth is that credit-card debt is forcing many students to leave school. That's why earlier lessons about managing spending, knowing how much is enough, distinguishing between needs and wants, and understanding how to use credit are so important.

Preserve savings

Caution your student about dipping into savings to compensate for overspending. Savings must be respected. The more it is left alone, the more it grows. Regularly using savings to bail out of financial jams will wipe out a savings account in a hurry. Perhaps you want to release a monthly sum, transferring it into your child's account. That may keep spending in line or it may drive your child to use a credit card when funds are depleted. Now is the time your child will fall back on all those lessons you've been working on for the last 18 years!

Accumulation lessons

Many students work part-time campus jobs. Remind your student to use any campus earnings to continue to invest and save, even if it's minimal. Every little bit adds up over the long haul. Conversely, spending accumulates: Buying too many pizzas, high-end coffees, and hamburgers adds up as well. Spending on many small things can eat up a monthly budget fast.

Working and learning

Talk to your child about taking work seriously and valuing its importance. However, explain that school and work require scheduling and discipline. Students who work many hours to pay for too much consumption are shortchanging their education: the very thing that will secure them for the rest of their lives

About good and bad debt

Help your child understand the difference. Bad debt is charging $3,000 worth of clothing, eating "out" too often, or buying the coolest car to bolster one's prestige. Such debt takes forever to pay off, and that set of wheels will begin to depreciate the minute it's driven off the lot.

Good debt, on the other hand, uses money to further goals: like investing in student loans, medical school, or a good blue suit to wear to interviews. At this point in your student's life, good debt is the only kind to have.

Maintain asset allocation

Your continued lessons about asset allocation, which started with a four-bank system, should come into play as your young adult makes more money at summer jobs.