Budgeting Cash Flow Education

Discussing College Costs with Your Teen

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Going to college is exciting. In their first few weeks of freedom from mom and dad, new students want to see, do, and eat everything. This exploration costs money. So, the time to talk about budgeting is before your child leaves for campus. Helping them make a budget is one of the best graduation gifts you can give your high school senior.

Because it is rarely taught in school, financial literacy is often left up to parents. Along with teaching our children how to manage money, it is up to us to model the right behavior and reinforce good habits. Fill up their curriculum with financial intelligence before they graduate with these steps:

1. Insist They Get a Job

One of the best ways for young people to understand finances is for them to have a taste of real-world acquisition of money. Kids will experience receiving a paycheck, understanding banking and the beginning of budgeting and financial goals.

They may want to take a nice laptop to school with them rather than the still functioning, but not flashy, laptop they used during their senior year. Give the future college student the goal of earning enough money to buy that laptop. Have them calculate how much they will need to have earned by the end of the summer to pay for the laptop.

2. Explain Good and Bad Credit

One thing that hasn’t changed since we were in college is that banks still throw credit cards to 18-year-olds. It’s a good idea for us parents in theory; something always goes wrong; the child needs money, and we’re too far away to help immediately. It’s great for the banks because of the amount of interest and fees they will make. Sometimes, it’s not so great for the kids, who may get an early lesson in the effects of bad credit if they don’t pay the bill monthly.

Parents should have a conversation with their children regarding credit cards and spending before sending them to college. Whether or not you think it is a good idea for a kid to have an “only in case of emergency” credit card, kids will eventually deal with the concept of unsecured credit from banks and the potential negative implications of mismanaged credit.

3. Talk About Loans

One of us, parent or child, is probably going to be taking out a loan for the college education. Except for the very big or fast or wealthy kids among us, the high cost of college often makes loans necessary. Children need to understand the ins and outs of education loans, grants, and other means of paying for college that don’t involve cash or credit. The best time to have the discussion is the filing of college applications. Filling out financial aid forms may be a good place to start addressing what can be a difficult topic.

4. Pray They Listen, and Talk to your Financial Advisor

We talk a lot about the most expensive items such as computers, cars, tuition, and books when it comes to paying for a college education. However, the kids must eat, sleep and dress well enough not to get kicked out of class. Discussing budgetary basics should be a part of the pre-game talk for kids going off to college. They may need tips on how to stretch dollars in a grocery store or how to bargain shop for items they need.

Hopefully, you have a good relationship with your kids and can discuss these things easily. That doesn’t guarantee that they will listen. Your financial advisor is available to listen to you and take on any questions regarding paying for a college education.

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This content is developed from sources believed to be providing accurate information and provided by Kelly Financial Planning. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.