The prospect of a good job after graduation leads students to run up debt during their college years, believing that they can pay their bills when a steady paycheck is rolling in. It’s hard to keep in mind that life will bring more expenses when they’re in the working world: car payments, moves to follow job offers, payback of college loans, maybe marriage and children. Often students are surprised as they approach graduation and realize the full extent of their debts and the amount they will have to pay each month just to stay afloat.
Parents, too, face the consequences of student debt. If the student is on a parent’s credit card, problems like excessive charges, failure to pay a bill on time, or high debt levels can affect the parent’s credit rating. Many parents don’t want their student to suffer the consequences of debt, but too often, it is the parents’ retirement account that suffers, which leads to problems down the road.
Some colleges and universities provide credit or non-credit courses on financial management for students, or finance may be part of a freshman seminar class. If a class is available, encourage your student to take it. Most important, talk to your student about finance.
You can help your child develop financial skills, but it takes time, patience, and perseverance to work through the steps.
- Encourage—and teach—your child to keep financial records. You will need some of those records for tax purposes, and there will be times when your student will need proof of a payment or a receipt for some item. A week after classes begin, if he decides his advanced calculus class is too difficult and he wants to switch to an introductory math class, he will be able to return his calculus textbook only if he can find the receipt. Make sure your child knows that he must keep bank statements, tuition statements, receipts and warranties for all major purchases, credit card agreements, scholarship records, and loan agreements.
- Organize a file for financial records—During the first year of school, a single folder for finances in the college file box might be sufficient. Freshmen can combine all major financial receipts and records. As a general rule of thumb, though, if a folder becomes too bulky to easily manage, it should be arranged into two or more folders. When students move to an apartment, or if you agree that more organization is needed, a separate file box just for financial records will be helpful. Let your student decide if it makes more sense to organize records by month—putting all receipts and statements for a month into one envelope or folder—or by category, such as academic expenses, room and board, communications, transportation, etc. Encourage him or her to get into the habit of filing receipts and statements faithfully.
- Be sure your student knows what records are required for tax purposes and for student loan or scholarship applications. Even if you are paying most of the bills, your student will probably receive the statements and receipts. Discuss how you will communicate about those documents. If you need them for tax purposes, how and when will you get them?
(Edited from You’re on Your Own (But I’m Here If You Need Me), by Marjorie Savage, Simon & Schuster 2020)
Students take finances more seriously when they know their parents are concerned about expenses. Setting up a budget in collaboration with your student will help them understand the true cost of college, and tracking expenses helps them see how quickly money disappears.
Try this online tool for estimating a student budget.
What kind of spender are you? Work through this online quiz with your students.