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As the proud parent of a college student, it might feel as if your parenting days are almost over, but there is one important area where your almost-adult child can still use plenty of input and guidance: smart money management.
Newfound financial freedom can be intoxicating. There are so many interesting things to do on campus, and it can seem as if everyone else has lots of money to spend. Your student may succumb to the offer of easy credit, spend all of the student loan money you so carefully budgeted, and dig a huge debt hole before the first semester ends.
I always advise parents I work with as a college financial aid advisor to be open with their children about money. You should have money discussions throughout high school about the college choice, and continue these regularly in college.
When your student comes home for break — whether fall, winter or spring — check in with them about their bank account balance and budget for the rest of the term, or a new semester if that's the case. In addition, consider having a conversation about one (or all!) of these important financial topics:
Credit card companies often offer enticing introductory rates to new college students. Your student may think it’s awesome to just wave a smartphone to buy pizza or attend a show, until the bills arrive. The interest rate might increase, your student might not have the full amount or may miss a payment, and late fees and penalties are added. That five dollar piece of pizza suddenly ends up costing much more. Ask if your student has signed up for any credit cards, and explain exactly how they work. If they haven’t signed up yet, counsel them to wait so you can research the right kind of card together.
You and your student may use federal or private student loans to pay for college expenses. If the amount received was more than tuition, there might be “extra” money available. Since repayment is usually deferred until graduation, it can be easy to spend this money and then take out more loans for the next semester. Not until graduation do you realize that you’re $30,000 in debt. Be sure your student understands how much money has been borrowed and who will be responsible for repaying it. This is not “free” money; it’s borrowed money.
For more information, read "Borrowing for college: Advice about loans for students and parents."
Your student may have chosen a college based on a nice financial aid package; however, there could be conditions attached such as taking a certain number of credit hours or making satisfactory academic progress. If these conditions aren’t met, the financial aid could be withdrawn and you will pay much more to attend this college. Discuss where your student needs to be academically and financially by the end of second semester; make sure the financial aid/academic success connection is clearly understood.
Learn all about the FAFSA (Free Application for Federal Student Aid) and how to apply for/renew financial aid here.
But they are essential, and when we get in the habit of checking in about finances on a regular basis, it starts to feel less intimidating (trust me!).
Let your student know that you are there to help with any of the challenges they face on their way to academic — and financial — success.