Is Your Kid Starting College? Don’t Wait to Talk About Money

Ok parents, at some point you are probably going to get the call: “Mom, Dad, please help -- I’ve run out of money!” Maybe they blew too much on pizza, indulged in too many grande Unicorn Frappuccinos, or just ran into unexpected costs they didn’t anticipate. Whatever the cause, you can probably count on a desperate money call at some point. Making a plan ahead of time and deciding who pays for what before your teen goes off to college for the first time is a must. These conversations are a great way to teach budgeting and give your kid a great foundation for their spending habits and future financial lives. In many ways, college is a helpful “training ground” for life in the real world.

It’s up to you

Everyone approaches their child’s financial responsibilities in their own way. It often depends on how much financial responsibility you’ve been giving to your teen up until now. Was your child expected to work a part-time job in high school to pay for their “fun” money? Who buys their clothing? What about the super-cute, very expensive jacket they had to have? I think it’s best to start this whole process while they are living at home and can benefit from your hands-on guidance -- even if they don’t appear to be listening to what you have to say!

When kids start college, some parents agree to pay for tuition, room, and board, but they expect their child to foot the bill for everything beyond that. That might include trips to the grocery store, gas money, pizza money, clothing purchases, football tickets, streaming services, etc. Other parents intend to pay for anything they would have paid for at home, including things like toiletries, groceries, and gas, and only expect their child to pay for the extras.

Whatever approach you plan to take, the key is to set expectations (in detail) with your child ahead of time. Get everyone on the same page early on. This conversation should be a part of the college money talk between parents and their kids.

You spent HOW MUCH this month?!

The typical 18-year-old is not a “budgeter” and probably isn’t too interested in tracking their expenses. Unless you’ve been working with them on personal finances through high school, most kids don’t realize what they are spending money on. As mundane as it sounds, an important part of being successful with their money is being able to track it. Students can take advantage of whatever tool (an app, a spreadsheet, whatever works) makes it easiest for them. I personally love YNAB (You Need a Budget) to make sure I am allocating my spending in a way that lines up with my values. My teenager uses YNAB, too. This article gives a good summary of the best budgeting apps and tools available today.

For many kids, this will be the first time that they’ll be responsible for their own finances. So begins “The Broke” phase of their lives. To help your child, make a list of the categories they will need to pay for on their own and simply set a weekly budget amount to spend. Why weekly? Well, it’s easier to wrap your head around a weekly limit rather than a monthly limit. Once your child is comfortable with their spending plan, monthly might make sense, but it’s best to start weekly. If the weekly $50 budget is blown through in one week, your kid knows they have less to spend the following week.

Keep it simple, and your kid will learn some great financial habits.

Money doesn’t grow on trees

Again, people will fall on different ends of the spectrum. Some parents plan to pay for everything and others expect their child to pay for most things. It’s important to know that teens want to be involved in the discussion about paying for college. This is part of growing up! They can see the big picture and understand the extra costs they are responsible for.

The best way for college students to be responsible for their spending money is to get a job. Students can work over the summer and during school breaks. A typical college semester runs about 15 weeks. Just to run the simple math, a student planning to spend $50 per week will need to save $750 to cover their spending for the semester. How will they cover the $750?

Maybe grandparents and other extended family plan to gift money to the child for birthdays and holidays. What are the parents’ expectations regarding that money? Save some for future college spending? Blow it all right away? Some combination of saving and spending? Let your kid decide? You’ll definitely want to include gifts in the conversation.

Parents can also decide whether or not to provide an allowance to their child. Do you as the parent plan to continue offering financial support to a certain extent once college begins? How involved do you want to be?

Emergencies do happen: Be prepared

Parents and their kids need to have a plan in case of an emergency. What happens when your kid needs to go to urgent care? Do you want your kid to have a credit card for emergencies? You can easily set up a joint credit card and set a limit for your son or daughter’s spending. You can also set alerts for spending over a certain amount and track the spending online or with an app from the bank. The point is to make a plan and set expectations ahead of time.

Lots of things to consider!

There’s a lot to consider and everyone will have to answer these questions for themselves. How much? Where does it come from? What is the teen responsible for? It all depends on your family, your kid’s own strengths and weaknesses, and your goals as a parent. The key is to have spending money be part of the conversation. Don’t leave it unaddressed. Talk through your goals and expectations, and get your teen started on a solid financial path.

Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Alyssa Lum, and all rights are reserved. Read the full Disclaimer.