Well, it is almost August already – the time of year when those fresh high school graduates head off to college. This may truly be the first time your student is on their own, making decisions about how to handle the choices they will face. In many cases, those choices have to do with money.
As a parent, it may be hard to think that the child whose biggest money decisions so far have been about food and clothing. You might be concerned that they are in for quite a shock. In college, they will have to make smart financial choices every day – about what to do, where to go, whether to use a credit card, and how to spend their student loan money. If your children are already money smart, give them (and yourself) an A+; but if they need more help, here are some lessons you can impart before packing up the car:
- The BIG Lesson – live within your means! This is the fundamental part of money management for everyone from college students to business tycoons. In short, expenses should not exceed income. You might call it a budget, but it helps to teach your student about where their money comes from and where it goes. They might have grants and scholarships, student loans, and an allowance from you, or a job where they earn money. Help them see how much this adds up to on a monthly basis, and compare that against their possible expenses. Be sure to include every detail like lab fees, books, data plans, laundry, and personal entertainment. If the numbers don’t balance, there could be problems ahead.
- Talk about student loan repayment NOW! In most cases, you don’t really have to worry about repaying student loans until after graduation. But, they are there, lurking in the background, patiently waiting for those college years to pass. In the blink of an eye, the time passes and your new graduate is faced with thousands of dollars in debt just as he/she is starting out in life. Be very clear about whether you expect your student to be responsible for repayment, and compare anticipated monthly payments against future potential incomes and expenses. The best strategy is to borrow as little as possible now, to make those payments more manageable later.
- Credit cards are NOT easy money: Credit card companies like to bring in new college students as customers, and often offer very appealing introductory interest rates. They offer surprisingly generous terms for students who really don’t have a credit history. But the bills start coming in just as soon as your student starts using the card. If they are not paid, the interest starts to accrue. With today’s uncertain financial times, credit card interest rates could increase drastically in the very near future. Teach your student about the dangers of seeing credit cards as “easy” money. Consider using a debit card which you can load with a specified amount of money, and monitor their spending during the year.
- Keep searching for scholarships: These really are “free” money, if your student continues to meet the criteria. Some are only available to students already in college, so it is worth the time to keep searching after high school ends.
Don’t forget that you have to file a FAFSA for every year your student will be in college, and in need of financial aid. Assign responsibility for filling out the application, and set aside time in your fall schedule to make sure it gets done.
Congratulations and enjoy your freshman year of college, but remember to start making smart money choices. CFAA helps students who are planning for college now with every step, from completing the FAFSA and completing the CSS Profile to comparing financial aid offers and understanding student loan options. Rising seniors can set a CFAA new client free strategy session or a 15 Minute Power Chat to learn about finding ways to pay for college. To get the latest financial aid information and college application to-do lists, look for my bi-weekly JustAskJodi emails and check out my monthly CFAA e-newsletter.