If you have a child heading to college in the Fall, congratulations! You have survived the application process, the agonizing wait for acceptances, and the storms of the final year (almost). With any luck, your child is ready and waiting to get out of the house and take on their own life. But have you prepared them financially?
Young people are so sure that they know everything, but in the world of finances they may have little understanding of critical things like budgets and debt. Especially in their first semester before they get their feet on the ground, new students can be easy targets for lenders and vendors. One business owner near a campus referred to each Fall’s arrival of new freshmen as “the restocking of the herring” in the school.
It is important, ideally at the beginning of the summer, to sit down with your child and write out the plan for their college finances, discuss what you will pay for and what they are responsible for, and work out how they will manage the pieces that they are in charge of. Doing it now gives them a chance to work through the whole summer (and save that money), and it also gives them and you a chance to start thinking about how to set things up.
Firstly, at the big picture level, write out the numbers for the whole school year:
• Tuition and fees (subtract any scholarships):
• Board (food):
• Travel home:
• Personal expenses:
In addition to the numbers, write down who will be responsible for each item. Even if your child is paying entirely for their own college, go through this exercise with them to help them understand the full picture.
The first five items can be fairly easy to get accurate numbers for, but the last tends to be the most difficult. Personal expenses can vary from almost nothing to really any large number, depending mostly on what you and/or your student decide. The biggest question is typically whether or not they will have a car. Owning and maintaining a car can cost easily $6,000 per year, including insurance, gas, parking, maintenance, fees, and any tickets or accidents, so if money is an issue, this is a good one to skip. Beyond that, make your best guess together for what their personal expenses might be. Lastly, help them plan for where the money will come from, and how to manage it.
Putting together a plan for college costs at the beginning of the summer can take a lot of pressure off both you and your child, and give you a chance to prepare in advance. Best of luck to both of you for this big transition!
Today’s guest author is Linda Matthew, an Accredited Financial Counselor® and the owner of MoneyMindful Personal Financial Coaching, with which College Affordability Solutions has partnered since 2016. Linda has clients all through the U.S. and Canada. She is also the parent of one college graduate and one current college student.
Linda’s new book, Teach Your Children About Money, describes age-appropriate methods for helping youngsters learn about themselves and different ways to manage their money. It also has a special section just for college.