FINANCIAL MATTERS: Talking to Your Kids About Money
Even if your student isn’t expecting a limitless debit card when they go away to college, many have never had a serious conversation about costs, spending, and expectations for when they’re away from home for the first time.
Rather than sweep this huge financial investment of college under the rug, parents owe it to their children to discuss their financial commitment. Parents should make their academic and financial expectations clear. Do you expect that your children will have some “skin in the game” and be responsible for some measure of the expenses? Are they taking out loans? Are they responsible for their personal expenses? Do you plan to provide them with a monthly allowance? Writing checks without having these conversations does not give a young person a recipe for financial success in college or in the future.
Part of what makes this conversation even more challenging is that money is almost a virtual concept for many students. They use gift cards, credit cards, debit cards, and apps such as Venmo and PayPal. Money, the green stuff, may not be a meaningful part of their lives.
Here are some tips for getting that financial conversation going:
Be straightforward and honest about the costs of tuition and room and board. Most students can’t comprehend the idea of paying $50,000 for a year of college. Help them understand by comparing it to something more tangible – the costs of two cars perhaps.
Be specific about what you’re willing to pay for and even more specific about what you’re not willing to subsidize.
Discuss the hidden costs of college. Some fees are not included in the list of required fees. Unfortunately, even when a college has a “comprehensive” fee, the fee usually isn’t all-inclusive. According to Edvisors, most students will spend $250 to $500 per month on hidden costs. For example, class-specific fees may include charges for materials (e.g., art, chemistry, biology, physics), studio or practice room time, and laboratory fees. The same is true for per-use fees, such as the athletic facility, pool, or weight rooms.
Consider putting your expectations in writing. If your student will be responsible for paying back any loans, ask them to sign a contract. Some parents tie in academic expectations as well, like a 3.0 GPA to continue each year.
Make sure your student is cautious before setting up multiple credit and debit card accounts. Be clear with them about what you’ll pay for and what is their responsibility.
Schedule a financial check-up with them about a month into their freshman year. Review the specific items and where they’ve been spending your/their money. Let them know they’ve done a good job and loosen the leash a little if deserved and agree to check-in again at Thanksgiving.