College

The College Conversation: 3 Important Components

The College Conversation: 3 Important Components | www.TheHeavyPurse.comGiven the signficant investment college has become, most parents focus their attention on saving money to help offset those costs and take a more passive role when it comes to choosing where their child goes to school. They accept their child’s decision without really crunching the numbers. This is a mistake. Kids won’t automatically think to do that and even if they do, those numbers won’t mean much without some context from you.

The College Conversation: The Step-by-Step Guide

This is not a one-time conversation, but an ongoing conversations that should begin when your child enters high school.

1. Review Your Parental Financial Aid Package

Don’t wait until your kids start applying to colleges to tell them how much money you can or cannot provide. I suggest sometime during their freshman year to sit down and review your parental financial aid package at a high level, sharing with them what amount you can provide and the terms that must be met to receive and maintain your financial support. Not everything will fully register with them, which is why you will repeat this conversation every year, but you want to set expectations early and communicate often to avoid problems later.

Confirm College is a Shared Goal

While your child is still a few years away from applying to colleges, I also suggest you confirm now that college is something they want to for themselves. If it is, start discussing potential majors and careers that interest them now. Obviously they may change their mind by the time they head off to college, but this will give you an idea if college or a vocational school is more appropriate.

If college is something they are not interested in, find out why. You don’t want to force your child to go to college, but you want to make sure their reason is valid and not some fear holding them back. Additionally, if college isn’t something they want, what do they want to do after high school?

2. Identify which College Gives You the Best Return on Investment

We’ve seen the scary student debt numbers and it puts a lump in this Mom’s throat too. At the same time, I sit with a lot of parents who ultimately (and somewhat regretfully) admit that they didn’t consider the return on investment when their child chose which college they wanted to attend. They simply said yes. Regardless of who is footing the bill, you absolutely must consider the return on investment. And this can be hard for parents.

Why? Because you may need to make some hard choices on behalf of your child that may lead to slammed doors, raised voices, tears and broken hearts. Although your kids are on the cusp of adulthood, they are still kids who don’t have the real world experience you do. Even if they understand the risk debt carries, there is still a huge difference between understanding a concept and living with debt. To many kids, a little student debt is worth going to their dream college, but they may feel differently when they spend years paying off that debt and forgoing other things they want. You need to be strong for them.

Compare Cost of College to Earning Potential

This is often an eye-opening exercise for kids. Most kids tend to have an overly optimistic view of their earning potential. 🙂 They need to see what the average person earns in their chosen profession and more importantly, how that translates into a paycheck after taxes. So take the time now to run the numbers, comparing both low-cost and high-cost colleges so they can see a more complete picture.

Give Them a Snapshot of Life after College

Now let’s fast forward to after college when they are living on their own, earning the average salary in their chosen field. Find out where they want to live and an average rent in that city. Now give them a hypothetical picture of what their life will look like by subtracting rent, car insurance, gas, utilities, groceries, phone and cable bill and their student debt, if applicable, from their potential monthly earnings. They may be very humbled after they see how much money goes towards paying bills.

What Are Your Priorities?

Now it comes down to priorities. Many kids enjoy four or more great years at college on their student loans and credit cards, then face the hard slap of reality when they graduate. So talk to your teens now about what they want to life look after graduation and how their college costs can affect their dreams. Kids tend to live in the moment and don’t think big picture. You have to help them see the big picture. Life is about the choices we make, so help them understand the consequences of the choices they make today.

3. Create Your College Plan and Budget

Hopefully you and your child are now on the same page, and it’s time to put together a plan of action. Once again crunch the numbers and see where you stand. If you cannot pay for everything (which is fine), how will those remaining costs be covered? Scholarships? Part-time job? Grants? Work-study? Work the numbers to eliminate or reduce the need for student loans. If your child still needs additional assistance, then make sure they take the minimal amount of student debt possible. Often times they will be offered more money than needed, which they will accept without some guidance (or intervention) from you.

Help them put together a budget with clear expectations as to who is paying for what and make sure they understand the repercussions of not paying bills on time. I strongly encourage you to make sure your children are budget-proficient before they leave for college. Give them plenty of hands-on experience on how budgets work and why they matter.

Graduate with a Degree in Financial Independence

As I said in the beginning, parents put much of their attention on raising the funds to help send their children to college, which is completely understandable. While the financial support is a welcome gift, the most important gift you can give your child is the tools to be financially independent. To help them understand how to make smart money decisions that align with their goals and values. To have a plan in place to tackle any student debt they may have. To be nimble in good and bad times. As proud as I will be when my girls walk across the stage to receive their degrees, knowing that I have to raised them to be financially independent will be an even greater achievement.

Shannon

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3 important college conversations and considerations
May 21, 2014  •  18 Comments  •  College

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  1. Wednesday, May 21st, 2014
    As a huge finance and spreadsheet geek I plan on charting it all out for my children as to how much their student loans will impact them after college, how different colleges will impact their finances, etc. My wife and I got into a lot of student debt and I truly believe one thing that would benefit prospective college students is having a parent who will 1) help them pay for it - obviously! and 2) sit down with them and help them understand long-term implications of their college choices.
    • Shannon Ryan
      Wednesday, May 21st, 2014
      Yes, you are the spreadsheet guru, DC! The great thing is you'll be able to use that skill set to really layout all the options and scenarios and play "what if" with your children. It will be an eye-opening experience for your future children and really help you dialogue with them when you can lay it out for them. So many kids today graduate with huge debt that they didn't fully understand when the signed on the dotted line.
  2. Wednesday, May 21st, 2014
    I am terrified of how much college might cost when my kids graduate from high school in 13-14 years. We've been saving since they were babies but I'm not sure we'll be able to foot the entire bill. I hope to guide them into making the best choice possible.
    • Shannon Ryan
      Wednesday, May 21st, 2014
      I hear you, Holly! The girls have a few year yet, although not quite as many years as your girls, and it scares me a bit too. We've been saving since they were babies too, so I know we'll be able to at least help offset some of the cost. Then like you said, we need to guide them to the best choice.
  3. Wednesday, May 21st, 2014
    Great post Shannon! I think so much of it boils down to helping and working with your child so they can make as much of an informed decision as possible. I shudder to think of what college is going to cost in about 12 years when our oldest will be looking at it and you better believe we'll be having these discussions with her to make sure she's setting herself up for success in the long run, :)
    • Shannon Ryan
      Wednesday, May 21st, 2014
      I agree, John. It's really about having all the information to make the most informed choice possible. Kids tend to be more narrowly focused when they choosing their college and we need to help them see the big picture. Love that you plan to have these conversations with your kids as we are doing the same.
  4. Wednesday, May 21st, 2014
    I think the return on investment part of the analysis is the most critical. I have a high school senior who is interning with me for a few weeks and I had him run this analysis on his family and a friend. He is going to a state school and the friend is going to a private school. Assuming that the families paid 60% of their costs, the state school person would need to make $53,000 when he graduates and his private school friend would need to make $90,000. SO crazy!!!
    • Shannon Ryan
      Wednesday, May 21st, 2014
      Isn't amazing how a ROI can change the conversation? The sad part is so few parents do one to help both the parents and child see the bigger picture. And then of course, the next step is to make sure the child understands what an average salary looks like in their chosen field. Thanks to TV, etc., too many have an inflated sense of what they will earn. :) It's great that you helped your intern see the ROI on his chosen school.
  5. Kathy
    Wednesday, May 21st, 2014
    A couple of things to expand on what you already said. First of all, let your child know your expectations. Our son knew that we expected him to choose a major that would prepare him to be self-sufficient. We expected him to choose a public university, preferably in-state if it had his chosen curriculum. And he knew that we expected him to graduate in 4 years. He needed to choose his major carefully because we didn't expect that he would change his major, thus incurring additional costs because of having to take new pre-requisites and additional classes to catch up. He fulfilled all these requirements and we had enough money to finance his 2 years at grad school. As a result of our family cooperation, he graduated with a masters degree and zero student loan debt. I know that college costs have skyrocketed within the nearly ten years since he graduated so I don't know if we would be able to do that now.
    • Shannon Ryan
      Wednesday, May 21st, 2014
      Yes, the expectation part of the conversation is very important and something that needs to be started early. The earlier they understand what your expectations and stipulations are - the better. There is a lot less complaining and frustration. Love that you will able to help your son graduate with zero debt due to your careful planning and setting expectations with him. And, of course, your son doing good work at school to help make it possible too!
  6. Wednesday, May 21st, 2014
    Good tips Shannon! College is just so expensive, even though it's still years away for my daughter. I am a little afraid of what the cost will be by the time she is ready to apply!
    • Shannon Ryan
      Wednesday, May 21st, 2014
      Thanks, Mackenzie. Yes, it is a little nerve-wracking wondering what tuition will look like by the time our children are ready to go to school. All we can do is save what we can and prepare to handle any debt they incur.
  7. Thursday, May 22nd, 2014
    Really excellent post Shannon! Such important points and ones that I think MOST parents fail to address.
    • Shannon Ryan
      Thursday, May 22nd, 2014
      Thanks, Stefanie. Yes, sadly many parents don't address these points. Often times because they don't realize they need to do so, hopefully this will help parents start having these important conversations.
  8. Thursday, May 22nd, 2014
    Great tips Shannon! Comparing the cost of college to one's earning potential is a good exercise. But I guess you'll never know what's it going to be like when you get out into the field. When I first started my program, some profs were bragging at how much one can potentially earn. By the end of the program, they had brought in professional CEO's from the field as lecturers. And someone asked the question about starting salary, and we're surprised how low they were starting out. Nowadays, everything is moving so fast, but if it's something you truly enjoy, there are ways to make a career out of it, and without spending a fortune on your education.
    • Shannon Ryan
      Thursday, May 22nd, 2014
      Very true, you don't know until you're in the real world and that's what makes it so difficult. And you bring a good point that it's also important to take the salary averages your college choices tout with a grain of salt. You're better off looking at salary averages from a more unbiased source. :)
  9. Friday, May 23rd, 2014
    This is a truly good post Shannon! My younger sister is a second year college this school year, but sadly my mom can't afford to pay her tuition because she only received a small amount of pension from our father. Me and brother are going to help my sister financially and to pay her tuition fees and project until she will graduate hopefully by God's will.
Shannon Ryan SHANNON RYAN, CFP®
  • Meet Shannon

    "As a Certified Financial Planner, it is my passion to help individuals and families build a healthy relationship with money. I look forward to helping you raise financially confident kids.” - Shannon Ryan
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