In our “Cash Conversation of the Month” series, we highlight big-picture discussions you should consider having with the key people in your life to help keep your money goals on track.
This month, we tackle the touchy subject of getting your college-bound kid to take some responsibility for that hefty school tab.
Textbooks and meal plans and lab fees, oh my!
If you’ve got a kid heading off to college, brace yourself for a bit of sticker shock: During the 2014-15 academic year, the average American family shelled out $24,164 to cover college costs, according to research from Sallie Mae.
That’s about a 16% increase over the previous year—adding up to an extra $3,282.
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And we’re not talking about just tuition and room and board. There are a bevy of unforeseen campus budget-busters that you need to take into account, from student activity fees to late-night junk food.
Taryn Duffy, the president of a public relations firm in New York and mom to a recent Wake Forest University graduate, estimates she forked over up to $4,000 in unexpected costs during her daughter’s four-year college run.
“I certainly didn’t anticipate the expense of her going back and forth from North Carolina to New York so frequently, and no one ever talked about the money she’d need for extra food,” Duffy says. “But when your child is pulling a near 4.0 and living in the library, can you really begrudge her all the pizza, ice cream and gallons of coffee she’s relying on to keep her brain cells functioning?”
Duffy’s experience is far from unusual—which is why the college money discussion should encompass more than just how you’ll be paying the tuition tab.
“I’m a big believer in having skin in the game. Kids who feel financial responsibility for their schooling do better because they’re invested.”
Why This Convo Is So Important “Other than your home, college is the largest purchase a family will make, yet a lot of families never talk about how expensive college is,” explains Dan Evertsz, president of College Money Pros, which helps parents and students prepare financially for higher education. “In fact, a lot of people don’t even know!”
It doesn’t help that about one-third of colleges provide cost-of-attendance estimates that are at least $3,000 less than what experts believe the schools really cost—leaving families planning with low-ball numbers.
But a frank conversation about how to share the burden of the day-to-day costs can bring clarity to an often cloudy financial arrangement—of course Mom and Dad will pay for my concert tickets!—and may even inspire your kid to try harder academically.
“I’m a big believer in students having skin in the game,” Evertsz says. “From what I’ve seen, kids who feel some financial responsibility for their schooling do better because they’re invested in the process.”
How to Jump-Start It When it comes to talking family finances, Evertsz is an advocate of total—perhaps even brutal—honesty.
So once you’ve outlined a school’s cost-of-attendance estimate, delve into your child’s spending habits for categories like transportation, eating out and going to the movies with friends.
Once those figures are in place, it’s time to get real.
“The tone to set is business,” he says. “Don’t worry about sounding negative when what you’re really doing is being truthful. I like to just lay it out there: These are the numbers we have to work with.”
And rather than divvy up who’ll cover which expenses, Evertsz is a proponent of agreeing on an annual amount that your kid can afford.
“If you give your child one number that he’s responsible for, he’s more apt to actually pay it—instead of just treating mom and dad like the bank,” he explains.
And remember that money lessons learned now will help set him up for financial responsibility later, so encourage your child to research additional merit scholarships, campus jobs and even discount shopping close to campus to help defray his out-of-pocket expenses.
“Kids need to know the value of a dollar, and parents need to understand that their bank account isn’t an open checkbook,” Evertsz says. “If [kids] have a budget, and know that no more funds are available on demand, they figure it out real quick.”
This talk may seem harsh at first, but it can spare you an even more unpleasant discussion down the road.
“More often than not, families don’t have this conversation, and don’t break down their expenses,” Evertsz says. “Then they have to have the conversation they really don’t want to have—about how they can’t pay for school anymore.”