A Sense About Cents

Parenting Strategies – April 2010

Copyright © 2010 by Kay Kimball Gruder, SuccessfulCollegeParenting.com

 

 

This week, while on my way to Milwaukee to present at a conference, I found myself sitting among several executives talking on their cell phones. Three out of the four were discussing financial issues, and phrases like “meeting the project budget”, “re-working the financials”, and “locking in now” were part of the various conversations.

 

I began thinking about how important it is to give our children a financial education.  I recalled how little understanding the college students whom I’ve advised seemed to have about their personal finances. Graduating seniors would often say “I need to make a lot of money,” but they would not be able to identify how much or for what expenses. I am certain this wasn’t unique to the students I advised, because more and more colleges and universities are offering financial management and budgeting classes to students.

 

The temptations to overspend at college are intense. A student can spend in excess of $1,000 on a Spring Break trip and many sources point to college students spending most of their discretionary income on snacks and beverages, with entertainment and tech-gadgets also in the mix.  There are numerous opportunities for students to overspend when they eat off-campus and I have parent-clients who have shared that it is not uncommon for their child to go over budget on their food card even while living on-campus. Additionally, there is heavy peer pressure to have the latest and greatest gadgets and clothes, often with a resultant click of an on-line purchase. And if this isn’t enough, many students get involved in Internet gambling, usually through poker websites, with paper money never passing across one’s hands. I always wonder what life would be like if we only had $1.00 bills, and we had to count them one by one for each and every purchase or expenditure that we made. I suspect for some purchases we’d likely change our mind before we got to the last bill.

 

In working with my parent clients, and hearing stories from colleagues at colleges and universities, I am certain that we underestimate students’ temptations to spend and the degree to which we need to better educate our children about personal finances and budgeting well in advance of attending college.  I really want to avoid being in a position of having one of those all-inclusive conversations with my daughter right before she leaves for college. You know the kind - where the parent covers everything from sex, to drugs, to personal safety, grades, and not spending too much money all in a single go. Effective parenting is one part anticipating what your child needs to successfully navigate life, and another part paving the way for your child to acquire the necessary skills and perspectives to inform their choices and decisions.  

 

If your student is heading to college this fall, then the next five months present many opportunities for you to incorporate discussions about finances and situations in which your student can develop skills and obtain greater financial awareness. If your student is already attending college, then tax-time and the summer are good times to connect about financial matters and personal budgeting. If you would like to expand your conversations with your child about personal budgeting and finances, consider getting started by conducting an inventory:

 

1.      Make a list of the personal finance and budgeting topics about which you would like your child to know.

 

2.      Identify items on the list for which your child has already exhibited competencies and those for which your child has not.

 

3.      Identify any positive examples of financial management or budgeting that your child has exhibited, even in the smallest of ways, and find opportunities to share these with your child.

 

4.      Identify any negative examples of financial management or budgeting in which your child has been involved and think together about what other choices or options might have existed that would have resulted in positive outcomes.

 

5.      Think about future teachable moments that present natural opportunities for you to share perspectives and information with your child.

 

It is one thing to keep this sort of list in your head, and quite another to commit it to paper. If you write it down, though, you’ll more likely follow through and create time to teach your son or daughter. 

 

The college students I advised often expressed that they wish they knew more.  Consider expanding this activity to have your child map out what he or she would like to learn, following the same steps as outlined above. We all learn best when we can be in-charge of our own learning, and you might be surprised by what appears on your child’s list. 

 

Some of my clients have shared that they find it challenging to anticipate teachable moments, so below are some ideas to consider:

 

1.      Invest in the stock market with your child – even just a small investment.

 

2.      If your child’s school has an investment club or entrepreneur club, encourage involvement – dispel the notion that one has to be a math-whiz to get involved with these areas.

 

3.      Include your child in family discussions about major purchases.

 

4.      Let your child see you create or follow a budget.

 

5.      Bring your child along when you purchase something significant.

 

6.      Include your child in tax-time activities – even if you go to a tax specialist.

 

7.      Partner with your student as he or she completes financial aid forms or scholarship applications based on financial need – it will take longer, but consider doing this shoulder-to-shoulder with your child.

 

8.      Create “what if” scenarios outlining the differences in the costs associated with living on-campus vs. off-campus, or graduating in four years vs. five years.

 

9.      Look at what a study abroad opportunity would cost and budget in travel and daily living expenses.

 

10.Talk with your child about ways to allocate their summer or academic year earnings - how much they will spend and for what kinds of expenses, how much they intend to save and how they will reach that goal.

 

11.Talk about debt and interest in the context of credit card purchases.

 

 

It is through a solid understanding of personal finances and budgeting that one has a chance to make responsible decisions, and it is through opportunities to make choices that one has a chance to apply new knowledge and learn from the decisions made. In today’s society there are too many enticements and too much at stake to leave this part of your child’s education to chance.  Take time to help your student develop patterns of success around money management that he or she can bring along to college.

 

"An investment in knowledge always pays the best interest."

-Benjamin Franklin