It’s that time of year, parents and students alike are prepping for college departures. It’s an exciting but stressful time filled with school orientations, class schedules and dorm prep. There are expectations for both parents and students, hopeful for what the college years will bring. When it comes to discussing finances with your college student, communication is key. So how does a parent broach the subject of money and college?
The “Money Talk”
It is imperative that the discussion of money and college happen over time – having one big talk may be overwhelming for both you and your child. Speaking about finances should be integrated in everyday discussions and continue during the length of your child’s college years. Reaching a financial agreement will allow for you and your student to be on the same page. Below are some important topics to cover:
More and more recent college grads are leaving school with significant debt. Discussing actual school costs is vital in preparing your student. If your student needs to take out student loans to help pay for the cost of school, discuss with them what the payments will look like after they graduate, the importance of only taking out what they need and, lastly, what the loan should be used for. Educating your student on the effects of student loan interest will assist them in creating a sound financial future. Here is a quick overview of smart student loan options.
Unfortunately the cost of school does not stop at tuition and textbooks. Sitting down and setting up a personal budget with your child is a vital part of the college process. Agreeing on a monthly amount prior to the start of school will allow for decreased turmoil in the future. It is also important to talk about what you, as the parent are willing to pay for. Will you pay for extra curricular activities such as clubs, greek life and recreational sports? If you are planning on supporting your child throughout school, set a strict personal budget number and be specific in what you expect that money to cover (food, books, clothes, etc). Also, would it be smart for your student get a part-time job?
College is a time when many individuals open their first credit card, and oftentimes get in over their head. Many students are creating student loan debt but also credit card debt with few ways to pay it off. Talking about credit and the role of credit cards is a must-do before your student leaves the home. If done correctly, a credit card in college can help build one’s credit. Here is a list of our favorite credit cards for students.
College is a huge transition for both parents and kids. Preparing for and being specific about financial expectations will set your student up for success now and well into the future.