Preparing your soon-to-be college freshman to be financially responsible

Got our daughters credit cards once they started driving. The card has a limit but allows them to buy gas and pay for a tow just in case. My bank has a special credit card for college students and college banking program.

Presumably, you hope that she will learn from her relatively small mistakes so that she avoids making much bigger ones?

My kids are not allowed to have credit cards until they are self supporting. It is a myth that they need to build their own credit history or they wouldn’t be able to get apartment, car loan or any credit when they graduate. If you have very good credit, you can easily transfer it to your kid by putting him/her on your credit card(s). I did that with D1. When she graduated she was able to get 20K+ line of credit on her first card and was able to sign for her own apartment with a job.

I think it is more important for my kids to understand - “No income, no credit” than this pretense of “building credit history.” I just see too many young adults abusing credit by purchasing electronics (toys) that they can’t afford. My girls want to go on vacation with friends, I tell them to save up money for it, don’t think about putting it on my credit card.

I give D2 250 plus 400 food money a month. She works on campus for 10hrs/week. I know she probably goes out to eat more than she should because often there is not much left, but she never asks for extra. I don’t really care as long as she is managing.

@ucbalumnus‌ - Yes, she is one of those stubborn children who learns best from her own mistakes. She’s only a freshman and I monitor the card. My hope is that she will feel a little pain (without doing much damage) and learn financial self-discipline while she’s still on my watch. If she did not have a card and opportunity for error at this point, I fear she would make far more costly mistakes as an adult.

On the positive side, she has a knack for finding jobs and earning money. (Or maybe this is a negative because she thinks there’s always more money around the corner?) She juggled several jobs last summer and saved @3400 for her spending money at college this year. She has two jobs lined up for this summer.

I think my kids are an example of inherent spender vs saver personalities. It takes longer to instill financial discipline in spender personalities.

Agree with the posters who suggest a secured credit card with modest balance or add them as an authorized user on one of yours. With changes in banking rules, they may or may not establish a credit history being on our account. What we did when they were in HS was get them a gas station credit card (we opened it but added them as an authorized user). They would pay for their gas and whatever sundries they purchased in the store (drink, snack, etc). Then when they went to college they got their own cards with a modest limit (this was back when they could without our being a guarantor) and we added them to one of ours, for bigger purchases like an airline ticket. Worked very well. DS’s have fabulous credit and one is closing on a house today/Monday!

I fail to see how a student can become responsible for their finances when they are totally doing it with their oarwnts money as described by the OP.

The kid needs to get a job too. That is part of becoming responsible with money.

It seems to me that the process of learning financial responsibility starts back around age 2 and should be substantially complete by the time the kid leaves for college.

Agree that employment teaches a lot. Younger s worked in fast food and retail for almost 2 years in HS. That was very motivating and eye opening for him. Older s started a computer repair business, and then tutored in college. Very lucrative. Kids need to learn fiscal responsibility.

I actually think you’re more generous than many, but I come from a very frugal community. If your son really has no financial responsibility (he has his tuition, rent, meals, books and supplies, phone, transportation, etc, covered), then he should be working for his own discretionary spending money. He can work full time over the summer, while living at home, and save his money for the school year, if you don’t want him working during the school year. But honestly, if he has no other responsibilities besides school, he should be able to afford working at least 10 hours/week, unless you think he’s really going to struggle with school. Having him work for his own money and then live within that budget will teach him much more about financial responsibility than being given an allowance every month from mom. He’ll have the added benefit of having something to put on his resume.

There is really no should because it is different for each family and kid. My older daughter interned at an IB junior year and made 20K over the summer. The younger one will intern at a non profit or at a DA’s office this summer and probably will make $9/hr. I will (and are) subsidizing D2 more than I did for D1. D2 is trying to work 10 hours a week, but this year she has LSAT, full course load, a thesis, and a major scholar application she is working on. I don’t see why D2 needs to stress over money when she already has a very full plate.

I should clarify that Son WILL be working summers (starting this summer). Between my contributions to his monthly expenses and his summer savings, I think he would be okay to open a credit card in his own name in his junior year and then start buying whatever(a car would be a nice way to establish credit) at his own discretion. But after reading all the comments, I’m wondering if I should get him a credit card now or add him to my own. I have read a lot of great ideas so I’m going to have to think about the best route to go. Thanks for all the helpful comments everyone!

Also want to add that I had no idea that a debit card does not establish a credit history.

We’re paying for college and my daughter will take care of all of her expenses when she is there. She has a savings and checking account and has been using them for a couple years. We are getting her a credit card this summer in case she is ever in an emergency where she needs to spend more than is in her account. She’s working the same job she had last summer this summer. She can work there over breaks too. She’ll look for a job on campus. I think she’ll be fine.

Our D had a checking and savings account at 16. She was a careful saver. She received her own VISA when going off to college. Smaller limit. $700. She is very careful to pay the bill in full each month. I hope this will help establish credit so she can rent an apartment when it’s time!

When I said “should,” I didn’t mean every family needs to do it this way and there is no other option. I meant–and I’m sorry I didn’t couch all of my words in contingencies for the nitpicking that was bound to present itself–that in my opinion, preparing someone to be financially responsible (as the title of this thread says) should include a student working when they need and/or are able to. I don’t think every student needs to work at all times, but if they are reasonably able to, they should. I commented because the OP said in their post that their son was never very motivated about getting jobs, had no financial responsibility, and was going to be given an allowance. I think encouraging him to work would be a very beneficial thing because (1) it helps him learn to budget his money and his time and (2) it helps him get something on his resume. If he’s doing all of these things in other ways, then it doesn’t matter as much. But the easy way to encourage him to get a job is to have him work for his own discretionary spending money. I’m not saying that every student should be working. Just that I think he should, and it sounds like he will be.

But I’m biased because I was also the student with a full course load, applying for and interviewing (across the country) for grad school, working towards publishing a paper and making poster presentations, and still worked >10 hours/week (more like 20-30, depending on the week). And now, I’m the student with classes, clinical rotations, a thesis, boards to study for, and jobs to apply for, and I still work >10 hours/week. I’m not saying everyone in every situation should work, but that in the light of no other responsibilities besides classes, most students can work and that it can be a very good experience for students (in my vernacular, “would be good for most students” = “should”). And very important in terms of helping them to develop financial responsibility. Money can be different when it’s what you worked for vs. what you were given by a parent. Obviously, it can be sacrificed for better opportunities, but I don’t quite see her son studying for the LSAT and working on his thesis as a freshman =D

My daughter will be renting an apartment in August. She has had a credit card since 2006, paid in full every month. Her credit score is very high.

However, her income will be low next year as she will be a full time student. Even with a terrific credit score, and. Credit card since 2006, she cannot rent an apartment without a cosigner.

Just because you have great credit…does not guarantee that renting an apartment will be easier. That is only one part of the equation…the income of the renter is far more important.

Although S had his own debit card in college and med school (OOS), we made him authorized user on two of our cards (V and AMEX (Costco)) for emergencies. He never used either. As authorized user he was able to piggyback onto our credit history and didn’t have a problem renting an apt as a student on his own. We never cosigned for anything. (Going off topic, we have a neighbor who lost his house cosigning on his kids student loans when they defaulted.)

@jugulator20, what a nightmare. Those kids must feel so bad. Maybe I watch too much Judge Judy but cosigning for anyone just gives me the weebie jeebies. Adding Son as an authorized user is looking really good

My son established credit by applying for a credit card during the summer when he was working full time (after completing freshman year of college). His credit card is from his bank where he has a nice size savings and checking account. The cc has a low limit ($700). He also has a credit card connected to my account (he’s an authorized user) which he uses for larger expenses with my approval. His twin is just an authorized user connected to my cc and has never used the card.

My kids are authorized users on my Visa but they then also applied for and got 2 credit cards -a Visa and an Amex. So anything I would have paid for, they pay for so they can build up a little something and get the cash back. Paying in full in each month is a given.

I don’t know that this is helping with financial responsibility, but this is how we handle college expenses. Both of my sons got credit cards with their names on the account, along with mine, before they went off to college. Each card has a $2k limit, because I want them to be able to buy plane tickets, etc. if necessary, and sometimes books cost an arm and a leg. I pay their bill each month, but I take money from their accounts for purchases not related to school. Fortunately both of mine are frugal by nature, so it’s been working fine. Both will also have had leases for off campus housing before they leave college.