With graduation near, many high school grads are itching with anticipation about going away to school and unleashing themselves from their parents. They are looking forward to becoming independent and responsible adults.
As a parent, it is part of your job description to help them. While you may have had the all-important birds and bee’s discussion, the one about being responsible with money should be high on the agenda for things to talk with your college student about money if you have not done so yet.
- Till the law changed, credit card debt was the number one reason college students misused their credit. No longer can credit card companies recruit on college campuses for students to sign up for credit cards. Now, they need to prove they can pay or have a credit card on an account with their parents. If you are supporting your child while they are in school it is better to give them a debit card – you can put money into their checking account once a month to replenish funds – keeping some control over the way that they spend. Let your kid know that they have limited funds and you expect them to live within their means.
- Help your kid make a budget. Free reign with money can be a heady experience. There is no better time to learn to budget than while going to college. There are no kids to feed, no mortgage to pay; the expenses of a college student are fairly straight forward. Helping them with a budget and telling them they need to live within it is an experience that they will thank you for later on in life.
- If your child is like most college students, part of his education is being paid for with student loans. Since student loans often are used to finance living expenses your child has to understand that this money cannot be used frivolously. Financing a spring break trip may seem like a good use of that loan at the time – but will not look so great when the next rent check is due and you are short. If it is not an essential expense for school your child needs to know that it is inappropriate to use student loan money to pay for the expense.
- Realistic educational goals need not be realized at the most expensive school you can get into. Parents, many kids do not believe this and think that an Education degree from a prestigious and expensive school is worth the additional $100,000 expense – this is not always true in areas of study that are offered to all comers. Additionally, local schools are less expensive than going out of town. Encourage your child to go to school locally if possible. A good compromise is to do the first two years locally and then go away. That gives the student an opportunity to work and save while going to school and lessen the amount of loans they will need to go to an “away school” or a an Ivy League school.
Starting a conversation with your college student about money may be one of the most important conversations you have with your child this summer. Oh, the conversation parents need to have can be short: hand them this article and admonish them; “Money does not grow on trees!”