College is not just about studying and social life. In many ways, it is a set of training wheels for adulthood that helps you learn to navigate being fully responsible for yourself, including your finances. In many families, however, money is a taboo subject. But if a child is going to grow into a successful adult they need to understand how money works. Before your graduate heads off to college, you may want to talk about their financial health. Hopefully, they already have a basic understanding of bills, budgets, and credit (BBC), but the application of those concepts is about to get very real.

This is a complicated issue. If you have a trusted financial advisor, ask them if they would consider giving your child a crash course in credit, savings, and investment. Not only will a professional likely be able to explain it more clearly than you can, but making a connection now will set up a relationship with an advisor for your student in the future. But if setting up such a conversation is not an option for you, here are a few steps and tools to set your student up for financial success.

Bills:
Start with the basics. What are you still willing to help pay for and what do you now expect your child to provide for themselves? This might seem obvious to you, but I had a dorm mate who was shocked when her parents didn’t provide her an allowance once she left for college, and her parents were shocked she still expected it. She found out she would no longer be getting an allowance the day her parents dropped her off for college, and she had no idea how to make money, much less how to budget it.

Don’t take for granted that you, your partner, and your child are all on the same page. Each family’s finances and expectations are different, so there are no wrong answers, but you do need to clearly lay out what you will continue to cover and for how long.

That includes things like:
*Tuition: Tell your child exactly how much money is already set aside, and who is covering any overages.
*Books, housing and meal plan: Do you consider books and housing costs to be part of tuition, or do you expect your child to pay for them? Will you cover meals they don’t eat in the dining hall, or is that pizza they ordered on their dime?
*Clothing and personal care: Your child probably never even considered paying for their jeans and haircuts. Are you willing to pay for all or part of that, or is it time for them to take over?
*Vehicle payments, gas, and maintenance: If they are taking a car to school, who owns it and who is responsible for its upkeep?
*Activities: Are those debate team trips part of the pre-law course work, or do you consider that to be extracurricular?
*Vacations: Will you cover all trips, only family holidays, or do you expect your child to pay their own way if they want to go on the annual family ski trip?

Budget:
Now, your child needs to build a budget for their new responsibilities. Using all of the factors discussed, have them carefully think about where their money will go and how they will track their spending. The NerdWallet website has a great free budget worksheet that has a student option and can help guide the process.

In some instances, it’s a good idea to ask your kid to write down everything they spend money on for a month. It’s often an eye-opener how quickly they spend their cash.

As we all know, the cost of living can differ from place to place, so have your child research the average cost of things where they will be attending school. An online cost of living calculator (NerdWallet also has one of those) can be helpful.

After they have a base number for their cost of living, have them add a reasonable percentage on top for savings. An emergency fund should be part of their budget. Does your child want to give a certain amount each month to a charity, or will they be giving back to their community through other means like service work? If they do plan on donating, that needs to be included in the budget as well.

Now that you agree on who is responsible for what and what bills your kid need to pay regularly, you need to discuss how they make or receive money to cover those costs.

Will you be paying the bills you agreed to cover directly to the school, or will you supply an allowance to cover them? What are the stipulations for that allowance? For example, a certain GPA to access the funds? Will you provide the allowance through a pre-loaded bank card, or will you deposit money into your child’s bank account?

How will your child earn the money needed to cover the expenses they are directly responsible for? Help them brainstorm. Can they apply for work-study, or do they need to get a job off-campus? Have them consider the maximum distance of the job from the school and how flexible the work schedule needs to be before they apply.

Now that they are going to have income, they need to have a place to put it. Help them identify the best bank for them. A family institution where you can link your existing account to theirs for emergencies might be a good idea. If they are attending university in a different country from you then an international bank might be a better option to avoid ATM fees and transfer penalties. But don’t decide for them. Help them research and figure out what questions to ask. Doing it for them won’t help in the long run.

Credit:
Perhaps one of the most important and most fraught aspects of finance is learning to use credit. Explain what credit is and why it’s necessary. There are a few ways your child can build credit now.

*Students loans: If you need to take out loans anyway, have them take out at least some in their own name. As they repay them after graduation, it will show that they are responsible borrowers.

*Credit cards: A low-limit credit card (think USD 200-500) paid off every month is one of the fastest ways to build credit. If your child needs to buy books, have them put that expense on the card and then immediately pay it off. A card is also a good idea in case they have a small emergency, like a flat tire.

However, it is vital that they understand interest and minimum payments. This is a complicated topic, so here are a few resources. There is an excellent article for first-time credit card owners on the Intuit Mint Life blog, called “Credit Card 101: How Do Credit Cards Work,” or if you prefer videos, there is a YouTube channel called Honest Finance that has a series on understanding credit cards. None of this is the most fascinating reading or watching your child will do this summer, but it is important.

*Authorized User: Many institutions will not offer a student a credit card, especially if they don’t have income. In that instance, an option is making them an authorized user on your credit card. This will help them build credit to eventually get their own card, but there are some things to be mindful of.

Authorizing them means they can legally run up your credit card bill. This could harm your credit score, and if you were ever to default the bank could hold your child responsible for the payments as well, since their name is on the account.

This period of transition can be a time for your child to grow in maturity and take control of their financial health while they still have you as a safety net just a phone call away. Learning to navigate their own finances is not the most fun or exciting part of college, but it’s an investment they need to make in themselves for their future.

KEEP READING: Money Matters, From One Teen to Another

Images: Pexels

So you’ve decided you want to invest in the stock market. The only problem is you haven’t got a clue where to start. The language of investments can seem incredibly confusing and even intimidating and you may feel like there’s just too much to get your head around. But never fear, here’s comes help! We’ve put together a list of ten of the most commonly used terms in the investment industry, all explained in simple, jargon-free English.

Equity
When you buy shares in a company, they become your equity in that company – the portion of the business which is owned by you. This is true however large or small your financial interest. An equity portfolio is when you have a number of shares in different companies.

Bonds
A bond is an investment in which you lend money to an organization such as a business or a government body. This loan is made for a fixed period of time, ranging as widely as 90 days or 30 years, though the average is between three and ten years. The money is lent at an agreed level of interest, giving you security that you will receive a definite return on your investment.

Mutual funds
Also known as unit trusts, mutual funds are investments which are divided into units. These units, which are equivalent to shares, can be bought from and sold back to the manager of the fund. The fund’s value per unit is calculated frequently to monitor its progress. Many countries have favorable tax regimes for mutual funds, as they encourage saving.

Options and futures
An option is a contract which entitles you to buy or sell a predetermined stock or bond during a specific period of time. The price is established before the contract is made. A future is a contract which obligates you to do the same.

Hedge funds
A hedge fund uses futures to offset the risk of investments falling short of expectations. For example, a fund manager concerned about declining stock prices might hedge his or her accounts by committing to sell some separate stocks at a later date. Hedging is used extensively in international funds to minimize the impact of currency fluctuations.
Exchange Traded Fund
An exchange-traded fund (ETF) is similar to a stock on an exchange, with its value fluctuating depending on the market. An ETF might include assets like bonds, commodities and stocks. Indeed, this is one of the main benefits of this type of fund, in that you get a diverse portfolio under a single umbrella.

Bid offer spread
The spread is the difference between the selling price of an investment and its purchase price. For example, if the selling price is USD100 and the purchase price is USD110, the bid offer spread is USD10. The selling price is always less than the purchase price, with brokers keeping the spread as their profit.

Quantitative easing
Many people wrongly believe that quantitative easing (QE) involves the printing of banknotes to try and boost the economy. However, it actually involves central banks buying assets like government bonds with funds created for the purpose. QE is aimed at promoting higher levels of lending and boosting the money supply when interest rates cannot be made lower.

Benchmark index
A benchmark index (BI) is a series of indicators used to evaluate the performance of a fund or investment manager. The most common BI for equity-orientated funds is the S&P 500 or the FTSE-250. Others are the Dow Jones Industrial Average and the Russell 2000.
Inflation
Inflation is an increase in the prices of products and services over time, reflecting the subsequent decrease in the purchasing power of money over the same period. It affects many areas of our lives, including our savings, our pensions and day-to-day costs like food and gasoline.

We hope our plain English guide to these investment terms has been useful. Remember, if you’d like more information about ways to invest your money, don’t hesitate to get in touch with our friendly teams across Asia. For your nearest office, visit www.bluestar-amg.com/contact-us and follow us on Twitter for updates about the world of investments and savings: https://twitter.com/bluestaramg.

Please note that beijingkids does not necessarily endorse the views presented in this article.

Mark Matlaszek has lived in China for over ten years and is the director of BlueStar AMG in Beijing. He has been helping expat families plan for their children’s future education costs for the last decade, as well helping parents plan for their retirement. If you would like a free consultation, contact him directly at mark.matlaszek@bluestar-amg.com.

Photos: Lending money.com, 401kcalculator, seniorliving.org (flickr)

 I once wrote an article about a lady who was referred to me by a client of mine. Her husband had just passed away and she was in need of some financial advice. Her family was your typical expat family: husband and wife from different countries, children in international schools, and the last ten years spent working in countries around the world.

The husband had been an investment-savvy person and he was the one who controlled the family’s finances. They had accrued various properties and bank accounts across Asia, and had made many solid investments. However, what the husband did not do was make his wife fully aware of all of their investments and bank accounts. More importantly, the family did not have an up-to-date will or a trust in place.

Each country has its own strict, unique procedures for when a person dies. The issue becomes a whole lot more complicated when you have assets in multiple countries. In this situation, the assets you have in each country are subject to the unique laws of that jurisdiction. This often creates a situation where they are not distributed to your family as you would wish. A will or trust is a simple way to ensure that your estate is divided the way you would like it to and a way to minimize any taxation upon death.

Since sharing this story, I have been inundated with enquiries from families who fear they do not have adequate planning in place and want to know what to do.

What Is a Trust?
Every time I turn on the television, I seem to see “Kardashianesque” families talking about a trust fund they have set up for their beautiful 15-year-old daughter named Madison or Chelsea. These children often seem to have no real understanding of what a trust is, and I guess when I was that age I didn’t really understand them either. I just thought it was a big pile of cash that the son or daughter would receive at the age of 21, and as it turns out I was mostly right. But to understand trusts fully, we need to know a little more about where they came from.

The origins of trusts lie in old British law. Back in the old days, when kings and queens lived in castles, the men would go off to fight in the crusades and they would have to leave their family and home behind. Women were not allowed to own property so the men would have to leave their house with their male friends or family. Thus, you “trusted” someone with your property.

Women can now own property, but the fundamentals of a trust are essentially the same. The most common use of a trust is to create a legal entity or agreement around your property in preparation for your death.

When I was 15 years old, I came home from school one day and saw my parents sitting with their financial advisor. At the time, I didn’t know what a financial advisor was or that my family had one and I definitely didn’t think we had enough money to need one.

He jokingly said to me, “Your parents have now just given you all of their money.” My parents had put their property in trust with my brother and I as the beneficiaries. Under UK tax law, if my parents put their property in trust and stayed alive for the following seven years, then the property would belong to my brother and I free from any inheritance tax. For them, this simple planning has performed its function and my parents can live the rest of their lives confident that their wishes will be carried out.

What Is a Will?
A will is something we are all more familiar with; indeed, I think we all secretly hope that we will get a letter one day saying that a long-lost great aunt has passed away and written us into her will for a slice of her country estate.

Like a trust, a will is a legal document that you write up in preparation for your death. It should be updated whenever your family’s financial situation changes, not when you start fearing death. You should own a will in every jurisdiction where you hold assets as to avoid problems associated with retrieving  them if the holder passes away.

Furthermore, it is good advice to arrange your family’s finances in a simple and accessible way. If you leave a country and have no intention of returning, then it makes sense to close all your accounts. If you are using bank accounts to pay debt on a property in this country or a similar arrangement, then use a single centralized international account if possible. If you have left an investment behind with an advisor in the same country, it is usually possible to meet an advisor in your new country who may be happy to take over the asset’s management.

Trusts and wills both offer different benefits and can range from very simple to very complex depending on each person’s situation.

To summarize, the benefits of a will or trust include:

•  Holding assets outside of your estate to reduce tax
•  Ensuring that your wealth is passed on to the right people
•  Speeding up the probate procedure

When in doubt, speak to a professional.

Please note that beijingkids does not necessarily endorse the views presented in this article.

About William Frisby
William originally arrived in Beijing as a finance guy on a bicycle and will probably leave as a finance guy on a bicycle. He works for Premium Finance Group (PFG), a financial consultancy that has been established in China for over ten years. PFG offers clients no-nonsense, personalized advice and serves the whole of China from their Beijing and Shanghai offices. Services include international property, investment, insurance and financial planning. To contact William, email william.frisby@premiumfinance-group.com.

Photos: Laszlo-photo, Ota_photos, Images of Money (Flickr)