Financial Literacy for Prospective College Students

shutterstock_165246950It’s never too early for a high school student to learn financial literacy. In just 4 short years they graduate, so prepare them now for the financial responsibility they will carry during their time in college.

Although they are well aware of the steep price of higher education, it’s difficult to fathom the weight of student loans and easy to put off worrying about them until graduation.

Many college freshman — new to managing their lives on their own — make mistakes simply because they were unaware of how to budget efficiently and how quickly school supplies and dining out can add up.

Start discussing family finances, personal budgeting, and appropriate credit card use now so they are familiar with these basics from the start.

Here are a few tips to help your teens pass Finance 101:

  1. Plan Ahead – Starting their junior year of high school, get them thinking about financial planning for college. A great place to start is by sitting down as a family and creating a family balance sheet. Then, help them carefully choose the colleges they want to apply to with finance in mind, as tuition costs can vary significantly between in-state and out-of-state, and public and private colleges. Be open and honest about the amount of financial support you can realistically provide.
  2. Apply for FAFSA – There are a lot of financial aid options for students, but federal loans have much lower interest rates than private loans.It’s best to apply early, making January the best time to file your FAFSA. Some schools and now 7 states — Illinois, Kentucky, North Carolina, South Carolina, Tennessee, Vermont and Washington — award aid based on a first-come, first-served basis. Use last year’s tax return and your most recent pay stub to estimate fields in your FAFSA, and update the form with more accurate info later, once your taxes have been filed.And even if you think you won’t qualify, file anyway because the qualifications vary between different schools and states.
  3. Create a budget – Teach your teen how to create and stick to a monthly budget. Put him or her in charge of budgeting grocery shopping for the family for a week or month and see how they do. If they go over budget, discuss what they could have done differently and help them plan how they would make up for it the next month.Once your teen has a good understanding of budgeting basics and best practices, work with them to create an estimated budget for college. During the application process, make sure they are aware of which schools are more financially within reach and which will require significant loans. Knowing this will allow them to factor finances into their final decision on where to go.
  4. Don’t take out more loans than necessary – It’s scary to think you could run out of money, but taking out too many loans can be a bad financial move because the bigger the loan, the more interest it incurs.     If there’s loan money left over at the end of a semester, make sure your student knows that it’s not extra cash to burn. Have them save it for the following semester or pay it back right away.
  5. Think realistically about the future – Financial planning for college can be overwhelming, but it’s important for your teen to have a realistic understanding of how college can affect their financial future down the road. Make sure they have a clear understanding of how paying off their loans will work and what to expect upon graduation when payments kick in.

During college and down the road there are three major financial points every one should be knowledgeable of: controlling debt, saving money and protecting assets and income with insurance.

Let SelectQuote help find the right coverage for you, so your parents and family can be protected from the burden of your student debt in the event of your passing.

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