When Michelle Lajoie drops her eldest child, Elizabeth, off at the University of Lethbridge this September, there may be tears, and a few worries. But not concerns about how Elizabeth will cope with the financial challenges of living away from home for the first time.
From an early age, the Lajoie kids were taught how to spend and save. “We always had a 50-50 rule with both our kids. Fifty percent goes in your pocket, and 50 percent goes in your savings account,” explains Lajoie. “We started that from the time they were tiny.”
Such a foundation will hold Elizabeth, who’s 17, in good stead. But ready-to-launch kids also need tools and strategies to start their adult relationship with money.
Talk to your children about interest, minimum payments and credit scores and help guide them through those early purchases and payments.
Learning about credit
You can’t do much these days without a credit card, but credit can lead to debt, especially for spendthrift twentysomethings who may be away from home for the first time. That’s why Lajoie gave her daughter a prepaid debit card – once it runs out, she can’t use it anymore until she tops it up with money she already has.
Some experts also suggest using a credit card with a limit of a $1,000. However, it’s not just about getting kids the right card – they also need to understand how to use it. Talk to your children about interest, minimum payments and credit scores, and help guide them through those early purchases and payments.
Upgrade the bank account
Your teen might need to switch their bank account, especially if they still have a children’s account. Banks offer competitive student packages, with perks including no monthly fees, a set number of free transactions and free Interac e-Transfers. Encourage your teen to shop around.
Be sure your child understands how to use the account’s functions and check the balance online. Lajoie helped her daughter set up the transfer to pay the $1,000 deposit on her residence room. “Next year, I’m not going to be there to do that for her, so she needs to learn to do that now,” she says.
Get paperwork in order
Before your young adult heads off for a grown-up life, make sure all their financial and identification paperwork is up to date – they may need it for school, job applications and more. Support them in getting an updated passport, and be sure they can find their birth certificate and social insurance number.
You may want to suggest that they leave any non-essential ID at home and keep password-protected photographs of their paperwork on their phone.
Finally, petty theft at postsecondary institutions is common, as are computer hacks. Make sure your growing teen understands the security risks, especially as they relate to online bank accounts and credit cards. Put together a list of phone numbers to call in case something gets stolen.
Talking about money means prepping a teen for the good and the bad. Get them prepared for both as they move into the next stage of life, and they’ll be less likely to make costly mistakes.