Given 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.
This is not a one-time conversation, but an ongoing conversations that should begin when your child enters high school.
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.
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?
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.
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.
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.
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.
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.
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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SHANNON RYAN, CFP®
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