Next month, thousands of kids are headed off to college for the first time. I remember it like it was yesterday. Based on my high school academic prowess, my parents decided it was a good idea for me to get a head start on college by sending me to summer school the summer before my freshman year at the University of Alabama. It was a Saturday and my father and I, along with a small suitcase of clothes, headed for T-town. Along the way I asked him where I was going to live. He said, “Well, I remember a fraternity brother lived in a small apartment behind this man’s home next to Druid Drugs (anybody remember Druid Drugs?). In other words, my father had no idea where he was going to deposit me. We pull up in front of this modest home, walked up and knocked on the door. After a moment a small elderly man answers the door. Dad tells him the fraternity brother story and asked if he could rent it for the summer for his fine son (turns out the gentleman remembered dad’s fraternity brother renting the apartment). The man with a wry smile said, “If he can he can live back there, I’ll let him stay rent free!” That should have been my first clue. The one room twelve-by-twelve shack had no air conditioning, a claw-foot tub and a twenty-something-year-old mattress and bed springs stacked against the wall plus two inches of dust and dirt everywhere. Remember, this was June in Tuscaloosa…when the paper mill was still operational! Dad set my suitcase down, gave me a firm handshake and drove off. There was no college ‘orientation’, just a class schedule and a pat on the back. I didn’t even know where the business school was! I can remember studying at night and having to take ‘tub-shower’ intermissions to whisk away the sweat. One night a family of roaches the size of humming birds came in through the open window. A book fight ensued (they won…).
I tell this story because within it is a valuable lesson I learned. Needless to say, you could never accuse my parents of being ‘helicopter’ parents. They threw you out there and let you figure it all out for yourself. In doing so, I became fiercely independent which impacted every aspect of my life including my decision, at an early age, to start my own business. Being independent-minded, I paid a lot of attention to my personal finances because, by doing so, I remained independent from my parents after college. I struggled to buy my first home then challenged my roommate to do the same. We then agreed that the first to rent his home would move in with the other. I rented mine and moved in with him…so it became one of my first income-producing real estate investments.
If you’d like to give your college-bound child a financial head start in life, consider the following tips:
- Build a budget together. Sit down with your college student and together work through a budget for the school year. Once you have the school year planned out, break it down into bite sizes…week-by-week. For a sample College Budget, visit the Resource Center at www.WelchGroup.com; click on ‘Links’; then click on ‘Cash Management for College Students.
- Give them the money. Set up a joint account with your child so that you can monitor their spending but fund it either monthly or quarterly based on the budget you’ve established. They’ll now be responsible for paying all the bills, including tuition, room, board, books and discretionary spending. If you want them to have a credit card, start with a debit card and make sure they track all debit card purchases in the checkbook register along with checks written while keeping a running total of their checking account balance. An excellent free electronic resource is www.Mint.com.
- Be a good coach. Think of what you admire most about your favorite coach (in any field). Their number one characteristic is probably not criticism. It’s more likely to be encouragement and support. You’ll want to monitor your college student’s progress closely in the beginning. In my experience, it takes two years to become a master budgeter so give your child a break and help them up when they stumble.
- Let them help. In my experience working with families for over thirty years, children who helped pay for college have a much greater appreciation for their education than those who got a free ride courtesy of their parents. Consider having them work part time or summers to save money for part of college costs. This may be as simple as empowering them to earn their ‘play’ money while you fund the basic costs of college. One way to ‘earn’ money is to get a scholarship. There are thousands available, some just for the asking. Visit the Resource Center at www.welchgroup.com; click on ‘Links’; then click on ‘College Scholarship Search Engine’.
- Have them set goals. In a decades-long Harvard study, the 4% of graduates who consistently set goals later created ten times the wealth than the remaining graduates combined! College goals might include building an emergency reserve, finishing college debt free, building a savings account or saving for a college abroad program.
We’ve all heard the wisdom of ‘feed a person a fish, and you feed them for a day; teach them to fish and you feed them for a lifetime’. Use your children’s college experience to teach them the money management skills they’ll need to excel.