Having the money talk: Financial literacy for college students
The parade of freshman drop-off days continues.
Before the often-teary ride home, parents feel compelled to impart tidbits of wisdom and life lessons, plus pleas for a balanced diet and a reasonable amount of sleep.
What is the one thing most parents forget to share? The question: How will you manage your money?
Unfortunately, many families never have a conversation about budgets or even reasonable spending expectations. Parents need to be aware of the realistic costs of books, clubs, activities and midnight pizza runs. But students can’t assume there is a limitless debit card at their disposal.
Many researchers have determined that rather than sweep this huge financial investment under the rug, parents owe it to their children to discuss their financial commitment.
They also recommend that parents 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? Just writing the checks and not having these conversations is not a recipe for financial success.
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, is not a meaningful part of many of their lives.
Here are some tips for getting that financial conversation going:
- Be straight about the costs of tuition and room and board. Most students can’t comprehend the idea of laying out $50,000 or more per year. Help them understand the investment 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 unwilling to subsidize.
- Discuss the hidden costs at college. Some fees are not included in the list of required fees. For example, class-specific fees may include charges for materials (e.g., art, chemistry, biology, physics, etc.), studio or practice room time and laboratory fees. The same is true for per-use fees such as the athletic facility, or pool or weight rooms. 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 these hidden costs. Here’s a link to a partial list: Hidden College Costs Checklist.
- Consider putting your expectations in writing. For example, 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, such as: “You must have a 3.0 GPA to continue.”
- 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 in. Review the specific items and where they’ve been spending your money and their money. Let them know if they’ve done a good job and loosen the leash a little if deserved, and agree to check-in again at Thanksgiving.
Not long ago, many high schools had courses on basic finances for students. Unfortunately, few schools offer them anymore, mostly due to budget cuts, so it’s up to parents to be the teacher.
If you’re not a good money manager, seek out someone who is, or consult a book such as The Complete Guide to Personal Finance for Teens and College Students by Tamsen Butler.
Financial literacy is just another part of your child’s education; it’s a great opportunity to share your wisdom.