Parents sending a kid off to college this fall have lengthy shopping lists, from those extra-long sheets for dorm beds to notebooks and flash drives. Your teen also needs to land on campus with some money smarts.
Many teens are clueless about managing their finances. In a study of college students' financial behavior by the National Endowment for Financial Education, 73 percent of the students reported engaging in some kind of risky financial behavior in the past six months, from paying bills late to maxing out credit cards. If you haven't started teaching your teen about money, this summer is go time. (Tweet this)
"Kids go from not paying any bills to all of a sudden having student loans and rent and eating out and groceries, so it's all on them at once," said Vince Shorb, CEO of the National Financial Educators Council.
Luckily, financial literacy experts have myriad suggestions for teaching your teen about money. Even if you have only a couple of months, they believe you can impart a lot of essential information.
Learning about credit is crucial, according to Laura Levine, president and CEO of the Jump$tart Coalition for Personal Financial Literacy. "We want people to understand credit, not just how to use a credit card but how credit works," she said. Too often, teens grow up watching their parents pull out a plastic card to pay for everything, and they may not understand that using credit creates a payment obligation. But in reality, "you can't skip a month" when you owe money without a cost.
Some parents believe that a debit card is a form of training for a credit card, but Levine said that is not so: One taps a bank account and perhaps lets a parent see where a teen is spending money, while a credit card can give much more free rein to seriously mess up their credit rating.
Another element of credit is simply keeping a credit card safe, Levine said. "Young consumers are notorious for not being careful enough with what they do with their credit cards." A case in point: the teen who leaves a credit card sitting out in a dorm room. The roommate may be trustworthy, Levine said, but "what happens with the roommate has friends in the room?"