Insights

Many of the families we work with share a common goal: They want to create opportunities for their children. There’s a flipside to that goal, however, that isn’t as commonly discussed: Teaching children how to manage money responsibly as they transition into adulthood.

For most of the families we work with, this coincides with sending a child off to college. This first foray into (semi) independence can get a great opportunity to teach your child foundational financial habits that can set them up for success later in life. The best way to go about this often varies by family, but here are a few conversations to consider having.

Start with self-reflection

Our kids tend to copy our money habits, often without even realizing it. Think through where you excel and struggle when it comes to managing money. Maybe you’re a diligent saver and keep a strict budget. Or perhaps you’re an emotional spender, using a shopping spree to help boost your mood after a bad day.

These habits aren’t inherently good or bad, particularly if they’ve worked for you over time. However, they may or may not serve your child, especially as a college student just starting out likely has different financial considerations than you do as a successful adult.

Understanding your own strengths and weaknesses when it comes to money can help you best support your child.

Who’s covering what

Go over the various costs associated with college. Start with the fixed costs—tuition, room, board—before digging into some of the more variable expenses, like food, extracurricular activities, and incidentals.

Then discuss who’s covering what, and on what terms. Here are a few conversation starters.

• Ask your child which extracurriculars they’re interested in and discuss potential costs. Some activities (Greek life or specific intramural sports) may come with higher price tags than others. If you plan to cover these costs for your student, discuss any terms you might have. For instance, do you want them to discuss the expense with you first?
• Food is a necessity, but there’s a big difference between paying for a meal plan and/or groceries, and paying for takeout and meals at restaurants. Do you have any stipulations around what you’re OK covering and what you want your student to cover themselves?
• Discuss a reasonable budget for incidentals. Does your child know what they spend on a monthly (or quarterly) basis? If you’re covering their clothes, car (including gas) and other incidentals, they may not be aware of how much (or little) they can expect to spend each month. Help them get a handle on this before they head off to school.

These conversations can help you set a budget for your student. Ideally, you can offer them a stipend to cover what you’ve agreed to. This approach tends to work better than a blank check; it gives them freedom and independence while encouraging responsible habits.

Discuss any terms

Now that you have a handle on what you’re going to be paying for each month, discuss what you want your student to contribute, if anything. Some parents stipulate that they’ll pay for things if their student gets good grades or if they pursue a certain course of study.

We tend to advise against this because it can be very hard to follow through on. Unless you are truly prepared to stop paying for your child’s education because of a bad semester of grades—which could result in their dropping out entirely—these threats can backfire. 

Instead, consider requiring a spending review after each semester. If there are items you take issue with, ask your child to explain why they made that purchase. Was it a need or a want? Does it align with their values and priorities? The goal with these conversations isn’t to guilt your child, but to encourage them to think of money as more than just dollars and cents.

Be careful with credit

College students are often inundated with credit card offers and promotions. While your child can legally make their own decision with regards to credit cards, missteps can harm their credit score and haunt them well beyond their college years. 

Consider hatching a plan with your student for how to approach credit cards. If they open a card, suggest that they keep it for a specific purpose, like meals or even recurring subscriptions. This can help them keep track of their spending and develop good habits, like paying the bill in full each month.

An advisor can help

If you’re not sure what approach to take with your student, consider bringing in an outside expert. Sometimes it’s easier for young adults to process financial education from a third party. Plus, bringing in a professional can help remove emotions from the conversation. 

If you’d like Quorum Private Wealth to help facilitate these conversations with your high school or college students, set up an appointment to start the process.