It’s without question that college is the starting line for fresh experiences and a new academic journey. It’s also a time to discover new interests, set and achieve new goals, and form lasting friendships. For some students, college is the official start of adulthood, which means taking on financial responsibilities and experiencing independence for the first time.
Aside from the upfront investment that moving away to college brings, your son or daughter may be responsible for taking out student loans, applying for scholarships, or putting money aside from part-time job or paid internship earnings. While managing finances can be burdensome for a young adult, there are ways to alleviate the sticker shock of new responsibilities and help your child prepare for success.
4 Ways to prepare for college expenses
1. Plan for financial success.
Financial independence is a critical point in your son’s or daughter’s life, especially if there’s been little or no financial responsibility in the past. The best thing your son or daughter can do is to apply for a part-time job in high school and save as much as possible before college.
To encourage financial freedom when the first semester of college arrives, encourage your son or daughter to apply for a work-study program or a part-time job. While you want your children to focus on their studies, it’s paramount that they begin to take some responsibility, especially since college is such a huge investment.
Work-study programs are a form of financial aid and are available all around campus, from the fitness center to the library, making them accessible and easy to apply for, if your child qualifies. The benefits of a work-study program include working on campus and tuition assistance, and some colleges even cover the cost of room and board in exchange for labor. But be sure to do your research before dismissing a part-time job.
Unlike a work-study job, a part-time job has no limitations on how much your son or daughter can earn. Plus, your child can gain real-life experience, such as working with others in the community. It’s also a chance to prepare a resume and learn the importance of managing a weekly paycheck.
2. Educate your child on the importance of a budget.
If you’re planning to finance your child’s college experience—tuition, room and board, books, food, and fun—be strategic. Instead of depositing a semester’s worth of money at once, consider making weekly or bi-weekly deposits. This can help teach the importance of sticking to a budget. Your child may also be less tempted to spend money on unnecessary outings with friends or on impulse shopping at the mall.
Aside from strategic budgeting on your end, consider assisting your son or daughter with managing day-to-day finances. While this sounds relatively basic, setting a personal budget is especially important because your children are still learning about the concept and importance of managing his or her finances.
The first step to creating a personal budget is to take a look at the financial instruments involved. Does your child have a savings or checking account? How often will you contribute to the account? Using the source of income, you can determine where your child will be spending money and how much is needed each month to finance those expenses. And, if your son or daughter has a part-time job, factor those earnings into this budget, too. While you want your children to have fun, it’s important to convey that education will benefit them now and in the future, and that saving for and during college will serve them well over time.
3. Let your child face natural consequences.
Mistakes are natural and an essential passage to adulthood. Say, for example, that your child makes a decision to open a credit card. While you can discuss the seriousness of credit-card debt, if your child spends too much on concert tickets or an outfit for the spring formal, consequences will follow.
Fortunately, young adults “have to show sufficient income before they can be approved unless they have a cosigner,” reports Reyna Gobel in a Forbes article, “What Parents of Soon-to-Be College Students Need to Know About Credit Cards.” She interviewed Beverly Harzog, author of “Confessions of a Credit Junkie,” who noted that “The CARD Act also banned gift giving to entice college students to sign up for credit cards. No more free T-shirts to sign up for a credit card. And the CARD Act also prevents card issuers from sending pre-approved offers to anyone under 21 without the individual’s consent.”
Finally, don’t take a risk by co-signing a credit card for your child. A credit card is a financial decision young adults should make independently, when they’re ready to handle financial responsibility on their own.
4. Have a talk about finances.
The cost of tuition is often the most critical element in the college-planning process. While the Free Application for Federal Student Aid (FAFSA) can ultimately alleviate the cost of tuition, it’s important to discuss any financial limitations you may have. If your family is undergoing circumstances that affect your financial situation, be sure to document that on the financial-aid application.
In addition to financial aid, your son or daughter could benefit from applying for a grant or scholarship, which your child won’t have to pay back after college graduation. According to Big Future by The College Board, “Students received a total of $122.7 billion in scholarships and grants in 2013-14. About 40% of this free money comes from the federal government and, to qualify, you need to fill out the FAFSA.” Your child can locate and apply to a variety of grants and scholarships from the government, colleges or universities, and private organizations.
If there are still some costs remaining after your child has completed the FAFSA and applied for outside scholarships and grants, you can help your child look into financing college through loans. Unlike scholarships and grants, loans must be paid back after graduation. The most common type is the Federal Perkins Loan, typically sourced from the college or university your child is attending. However, if the Perkins loan doesn’t cover the entire cost of college, you and your child can look into loans from an outside source, such as a bank or credit union.
Are you interested in learning more about helping your son or daughter manage personal finances and prepare for college? Check out our blog for a list of resources and related topics.