By FPA member Lisa A.K. Kirchenbauer, CFP®, RLP®
Last Updated: July 26, 2010
It’s time to take some steps to help prepare your student to be financially responsible and protected. Although, ideally you would have had conversations with them since middle school and high school, it’s not too late to have an impact. Here are seven things to consider that can make a difference:
- Have them explore/research possible scholarships and grants and talk about the cost of college. What a great project for their summer before college (or even better, the summer before senior year in high school.) College has gotten very expensive, even for families with means — $2,500 here, $5,000 there. You can search the Internet for databases of scholarships and grants. One great web site is www.scholarships.com. Don’t forget to check with your employer about possible scholarships for employees’ children. Also, don’t forget local civic groups like your local Optimist Club, Rotary Club and others.
Some parents may feel that their children don’t need to be “bothered” or “burdened” by knowing the cost of college. I would beg to differ. It is important for your son/daughter to understand the investment that is being made in their education. In many places of the country, the cost of a four-year college could buy a house. The point of the discussion is not to make them feel guilty, but to help them appreciate the investment more fully, and perhaps participate in helping to fund the cost. They are moving into adulthood now, understanding the cost of life is an important lesson.
- Teach them how to balance a checkbook. Even if they won’t be using checks, they still have to keep track of their deposits and ATM/debit charges. You can use your own checkbook as an example, which can then serve as double learning opportunity: learn how to balance a checkbook and get a better sense of what it costs to support them.
- Talk to your student about debt, debit versus credit card use and the responsible use of credit cards. This is one of your last chances to make an impression and have an impact on their values around debt. Talk about the challenges of getting into debt early in life and how it can impact the career choices that they can make later on. Explaining how student loan debt is different than credit card debt is another important discussion.
- Set up a reasonable discretionary spending amount for your student. Most college web sites provide some guidelines of what an average student may need for incidental expenses. It’s also good to talk about which expenses are discretionary (pizza and movies) versus required (books & fees).
- Set up a monthly deposit (if you are providing the discretionary spending money) into your student’s bank account based on your discussions in Tip Number 4. Make your life easy by making the deposit automatic. The other benefit of this monthly deposit is to allow your son/daughter to “practice” getting a paycheck and managing that amount each month. If a monthly deposit isn’t working, consider a bi-weekly deposit.
- Get their basic legal affairs in order. Most parents don’t realize that when their student leaves for college, they have become legally independent in many ways. By having a general and medical power of attorney, and perhaps an advanced medical directive, you can maintain some access and control over your son or daughter’s financial, legal, and medical affairs. Without these documents, you may end up in some challenging situations. It’s also another learning opportunity to explain what these are and why they are important to have as an adult.
- Finally, take the time to have a discussion around your values about money, work, savings and debt. As a financial life planner, I found that often parents never take the time to have a thoughtful conversation with their children around each of the issues. It can be a learning opportunity for you too as you have to clearly articulate what is important to you around money and work.
Sending your child off to college is huge transition in most parents’ lives. You can use it as an opportunity to create financially independent, responsible and happy children.
FPA member Lisa A.K. Kirchenbauer, CFP®, RLP®, is the president of Omega Wealth Management.