In two weeks, my younger daughter will enroll in college and begin her education at the state university.  After finishing her diploma studies abroad, my husband and I feel confident she is ready for college.  And that she is also ready to handle her allowance and day-to-day expenses.

However, I must admit, this confidence comes after a year of money lessons learned, some funny, some frustrating, and some painful for our wallets.

While many students are given an allowance as early as grade school, it is really in their college years when they taste financial freedom – no more parents taking them to school, or picking them up, they pay their tuition, buy their own books, get their own meals and more.

I remember a credit card company years ago that experimented by giving college students their first plastic currency, thinking it would make them loyal to the brand as they graduate, find their jobs, and grow their families.  Instead, that company ended with lots of unpaid credit card debt that had to be written off.  In short, that was a failed (and costly) social experiment.

To save parents and college-age kids from tough money lessons ahead, sharing a few tips that can help college students better manage their money, so they can focus on what matters most: earning the best university education to prepare them for life.

#1 Take time to have the money talk

Parents need to sit down with their college-age kids for the money talk.  Ideally, these talks have been happening since they started handling money (from holiday gifts to school allowance), but it’s never too late.

It’s important to set boundaries like what parents will pay for (school books), and what you will not pay for (fiction books).  Discuss how much the allowance will be, and why you came up with that amount (considering the cost of transportation, meals, etc.). If the allowance is smaller than what your college student had hoped for, be open to revisiting it, or discuss how the amount can grow over time.  This talk needs to happen, and not just once, but throughout the college years, and even when they start working.

#2 Help your child make a budget

Your money talk should have at least one outcome, and that’s your child's understanding he or she needs to have a weekly or monthly budget.  I would recommend starting with a weekly budget, because the shorter the time frame, the easier it is to know if you are overspending or underspending.  

Most students who receive the monthly allowance complain of running out of funds by the third week.  If your child will be tracking spending by month, this can happen to her or him too.  With a weekly budget, it is more time-consuming, but it will make it easier to adjust their spending to ensure their allowance will stretch to the full month.

#3 Open a bank account (if they don’t have one yet)

My daughters opened their bank accounts at age 7, but when they graduated from senior high school, they opened new bank accounts that would be convenient for their spending.  They chose one with a branch near their new schools, with a mobile app, with low or zero fees for their usual transactions, and other considerations.

My point is: do the same with your college students.  Maybe they have an existing account opened when they were young or teenagers.  They can keep using that, or they can open one that can help them with their budgeting, spending and hopefully saving too.

#4 Introduce the credit card – both upside and downside

One of the most convenient payment tools is the credit card.  You can shop without cash, go home with the item, or eat a good meal, and not have to pay for it until a month later (even longer if you time the cut-off date right).  But a credit card is not just all these good stuff so don’t simply hand your child a credit card.  Start by having him or her read the card’s terms and conditions – it’s not easy but those fine print can cost you.  

Then list the things she or he can use the card for, what a credit limit is, how to manage if a card is lost, and what happens when one gets into credit card debt.  I almost had a heart attack when I got a 10-page credit card bill.  Half of that was my daughter’s charges at the local convenience store.  She thought they were small amounts, but even small amounts add up, and in this case to 5 pages of charges and an amount double her allowance.

#5 Teach your child to say no

Your child will be interacting with other students from different backgrounds--some will have more allowance, and some will have less.  Teach her or him to say no when a classmate with more cash wants to eat at a more expensive restaurant.  Or when someone wants to borrow money or is asking to be treated to a meal, or more than one meal.  These are tricky situations, and your child will need to handle them now because there will be more of them later.  

There are ways of saving no that will not strain relationships like I can’t eat with you at the expensive restaurant, but we can have a meal tomorrow at this other place which I can afford.  Don’t also say yes to being treated all the time – we all want our child to learn to stand on their own two feet, and it starts by learning financial independence.

ABOUT THE AUTHOR: Aneth Ng-Lim returns to writing after more than two decades of working as a communications specialist in the government and the private sector. Her advocacy for financial inclusion and personal finance began when she served as head for Consumer Education during her stint at a multinational bank.