It’s best to start before dropping them off for their first day at college.
Each year about 17.5 million students head off to college. It’s a rite of August, marked by a packed minivan in the driveway ready to make the trek toward a new adventure. We leave our babies in a strange land. And with one last hug, remind them to make good choices and please call—at least once in a while.
Aside from buying a home, for many, college is our single biggest lifetime expense. But in all the conversations before the college send-off, did you take time to talk to your children about paying for college?
With total student debt currently at $1.3 trillion, the average Class of 2016 graduate owes $37,172 in student loans, according to Student Loan Hero. While it’s never too late to talk to your child about paying for college, the earlier you start, the better.
Researchers at the University of Cambridge found children’s money habits are formed by age seven. What? Yep, that early.
So, what can parents do to start teaching your young children how to save? Here are a few ideas.
When preparing your shopping list, talk to your kids about the difference between needs and wants. Instead of banking online, take them to the brick and mortar bank or credit union and, if you haven’t already, open a savings account for them. Show them how to go to websites like NerdWallet.com to find and compare savings account interest rates in your area. And when your kids get money for special occasions have them set aside a portion for savings, sharing (charity), and spending.
During middle school, talk to them about setting financial goals. Have them decide on a savings goal. Make sure it’s tangible—writing down a goal makes it real. Make the goal attainable, set a date for completion, and have them plan the steps to reach their goal. Go old school or high tech; there are plenty of options.
Early in high school, have a conversation about your kids’ career goals and what sort of education is needed. Graduation seems far off, but blink and they’re heading to college. You can check websites like FinAid.org/calculators to get an estimate of what college will cost when your child is ready to go.
Strategies for Teens
To help your teens prepare and pay for college, here are some ideas:
- Research the cost of attendance and starting salary of the job they want out of college. College Board has a helpful college and career site called BIG FUTURE.
- Explore scholarships. FinAid and FastWeb have extensive scholarship databases. Your kids’ schools’ guidance and career centers have access to national scholarships as well as local opportunities.
- Get a job and pay themselves first. Kids should set aside a portion of their earnings for college. They may not be able to cover the entire cost of tuition or room and board, but saving enough to pay for books, fees and spending money is a powerful lesson. And in lieu of a traditional savings account, check out options such as 529 Plans or Coverdell Education Savings Accounts.
- Start FAFSA. Complete the Free Application for Federal Student Aid starting in October of their senior year. This information is used to determine eligibility for financial aid. Some schools also require a College Scholarship Profile to qualify for aid. Work Study aid (caveat: kids have to look for and get the Work Study job) can be used towards paying down college debt or covering other costs. StudentAid.gov is another great resource for federal student aid programs.
- Sending your child off to college isn’t easy, but long after the twin XL sheets, shower caddies and the like have outlived their usefulness, the knowledge your child gained by taking an active role in planning and paying for college will reap lasting benefits.
Karen Hassett is Community Education Manager for Franklin Mint Federal Credit Union. As part of its commitment to financial literacy, FMFCU offers financial wellness workshops to the community through its business and school partners. FMFCU is a $1 billion credit union with 10 student-operated high school branches and 30 community branches in the Philadelphia region. FMFCU.org.