Want to scare yourself silly? No need to visit the local cinema; just sit down for 15 minutes with your college-bound kid and talk about finances. Sadly, most soon-to-be freshmen are heading off to their new, independent life without a clue about how to pay for it. Remember, they’ve been living the high life on your salary, not theirs and are probably quite comfortable to continue doing so. Don’t despair, however – listed below are five suggestions to get your student better prepared to make wiser financial choices away from home. Whether you choose to pay for everything or expect your child to bear most of the financial burden of college, help them understand the financial consequences of the choices they will be making at school.
So, amid the excitement of the final few days at home, make sure you carve out time to sit down with your college-bound student and do the following together:
1. Make a list of all the necessities.
Tuition: Talk about how long it took you to save this money & how you did it.
Room & Board: Discuss the fact that meals in the cafeteria are now paid for (so eat them). If off-campus, make a list of rental expenses, including utilities & household items. Who is paying for what?
Supplies & Books: Discuss the idea of choosing between new & used textbooks. Many schools have a buyback program once the semester is finished.
Phone/Laptop: Who pays for the phone charges? What’s the average life of a laptop?
Dorm Room Essentials: At a minimum you probably need linens. If there are other essentials to making the dorm feel like home away from home, come to an agreement about which ones are necessities and which are discretionary. Who pays?
Transportation: If your student will have a car, this means creating a subsidiary list of auto expenses (gas, parking, maintenance, insurance, registration, etc). If public transportation or a bicycle is the way to go, figure out the per semester costs.
2. Make a list of possible optional activities (i.e. the fun stuff)
Entertainment, meals out: If your student loves music, create a budget for concerts per semester. Remember that meals out may mean foregoing a paid- for meal in.
Sorority/Fraternity: This can be a significant part of your student’s life at college, but make sure you understand what it costs – initiation, dues, living expenses, etc.
Athletics: Club teams, gym membership, ballet classes, you name it. You want your child to get plenty of exercise, but if you pay for that dance class, she needs to go to it.
Other: This is the big unknown, but is also what prompts the phone calls home for “more money, please!” Putting a slush fund in your child’s bank account at the beginning of each semester may allow for some flexibility in her spending. Just set some ground rules about what happens when the slush fund is spent…
3.Discuss the use of a credit card
Responsible use of a credit card can be a great way to build a good credit history for your child and keep track of expenses. But most students inevitably get into trouble with the idea of “buy now, pay later”. Have some rules in place around:
When to use it
Paying it off
The high price of interest & carrying a balance
What to do if it gets lost or stolen
Is it just for emergencies or routine expenses?
4.Discuss the options for part-time work
Despite all these previous discussions, once they get to campus and see all the fun things they want to do, they may decide they need more money. Most campuses have plenty of options for part-time jobs (library, cafeteria, etc) that work around class schedules. Here are some things to think about:
Is part-time work a necessity or an option?
How many hours are reasonable and what can he expect to make?
Will it pay for part of the tuition or is it for spending money?
What happens to the job if it interferes with the grades?
What are the expectations around summer jobs?
5. Discuss Your Student Loans
If you are paying for college with student loans, make sure your child understands the amount borrowed, the interest rate, and the payment terms & conditions.
Are they paying off the loan after they finish school or are you?
What happens if they take more than four years or want to go to grad school? That may seem like a long way off for college-bound freshmen, but starting the discussion now will provide some clarity when those future decisions need to be made.
Gearing up for college in the dog days of summer is a busy time. Some of these discussions need to happen before school starts and some can happen as you go along. But make sure you don’t just set the rules or give your child the answers; walk them through the possible outcomes and decision points so they end up owning the answers.
And for those of you who have been down this road already, let us know what worked and what didn’t in discussing money with your college-age kids.