Sending kids
(back) to college can be a bit frightening for a whole bunch of Mom and Dad reasons. But one – often overlooked concern is financial literacy. Here are some conversation topics that could make for a real education.
Credit Cards: Your kids will be bombarded with credit card offers – and credit to the “credit novice” can be a financial WMD – destroying credit just as fast as they establish it.
Show them your credit report and how their behavior follows them forever. Talk about minimum payments, interest rates and APR’s. Explain how expensive a month of pizzas can become if not paid off monthly.
My advice: One credit card with a moderate limit for emergencies only – PAID OFF MONTHLY.
Banking: If you are providing funds to your kids while they are at school, have them set up a bank account for them at the same bank where you have your money. It will make transfers easier, and will allow you to at least somewhat monitor how they’re doing.
Getting a job: Discuss your expectations regarding work and their share of the financial burden of college. Remember, working in their freshman year can put extra strain on all of the adjustments of college life.
Have an understanding of who pays for things like spring vacation. Include the creation of a budget in the conversation. Be sure they understand that their most important job right now is to succeed in their academic work.
College debt: Explain what happens after graduation if they take on student loans. Those debt payments will have a profound impact on their first 5-10 years post-college. They’ll mean a more modest car. They’ll impact things like insurance rates, jobs, apartment applications.
They’ll mean delaying by several years, the purchase of a house. They can create hidden landmines when considering marriage. And all those loan payments could otherwise be a giant head-start on retirement savings – without which they’ll have to double down for the next 10-20 years after the loans are paid off.
Thinking about paying them yourself? The same math applies. They’ll put a crimp in your retirement savings, your timeline, and your retirement lifestyle.
Student loan debt is one of the most destructive concepts we’ve invented in the last generation and its sociological implications are enormous and far-reaching.
Four years: Graduating in the standard four years is tough. Be sure you both know what happens if they’re not done. Who pays?
Whatever the expectation is in your family, make it clear from the start. The money talk shouldn’t take long, but it may be the most important first lesson of adulthood.
