Every family’s financial situation is different, and it’s not possible to recommend “one-size-fits-all-families” budget information. Parents tell us that financial education begins at home, and that it is a family’s responsibility to teach students about money management based on their own financial circumstances. The most important factor is that when students see their parents balancing the family checking account, discussing budgets, and managing money, they get the message that finances are important.
Moreover, parents say financial lessons should start early—when students are in high school or before—but the discussions must continue throughout the college years. During the college years students are moving into a new stage of independence, and they are developing their own personal management habits, either positive or negative. Parents need to be aware of the financial pattern their students is developing because the choices a student makes can affect the family budget.
As their student progresses to college, parents should be providing reminders about critical financial issues including
- keeping track of how much their student is spending;
- the pitfalls of excessive credit card debt or overdraft of debit accounts;
- the necessity of setting aside funds each year as a reserve for the following year’s expenses;
- the implications of graduating with significant college loans.
The good news is that most college students manage their money responsibly. Most pay their debts on time (72%) and don’t spend more than they have (54%). Just under half set aside money every month (49%). (Sallie Mae, “Majoring in Money: How college students and other young adults manage their finances,” 2019.)
Did You Know?
- Debt can have a negative effect on students’ grades. Excessive debt often leads to decisions to reduce study or class time in order to work more hours to pay off bills and accounts.
- If students rethink their academic commitment and drop a course a few weeks into the semester, they still will be charged for the class even though no credits will be earned.
- Students who go below full-time student status (12 credits) may no longer qualify for a student discount on their parents’ auto insurance coverage.
- Students with fewer than eight credits typically are not eligible to live in a residence hall. (Exceptions are made for illness or special circumstances.)
- If the student drops below half-time status, some loans will be due right away.
- Wages earned this year may reduce financial aid eligibility for next year. Students might decide to work more hours to pay off debts, then discover that they will receive a reduced amount of grant or loan dollars the following year. Parents may then need to contribute more or take out a parent loan to cover the deficit.
- Students with excessive credit card debt or overdue payments run the risk of having a bad credit rating, and parents may feel they need to help out their student.
- Poor credit ratings can influence hiring decisions in the future. Potential employers can request an investigative consumer report about job applicants.
Students probably don’t need to understand the details of investing or long-term financial planning as college freshmen, but they should be prepared for higher finance by the time they graduate. College students typically learn on an “as needed” basis related to finances. What they should know, and what today’s college students are most interested in learning about, are strategies for saving money, options for paying for college, and budgeting