Parents and Post-Secondary Students: 7 Tips for a Constructive Money TalkAug 27, 2021
End-of-summer can be a bittersweet time for most students. For some, a slight feeling of dread will weigh on the season’s last moments of freedom. But not so for the university or college student-to-be. Of all the back-to-school moments in a student’s life, the pre-postsecondary jitters are definitely the most exciting.
Parents: how can you make sure your kids are fully prepared? While they’re busy planning the awesomeness of their year ahead, the excitement can make the realities of paying for their education harder to explain. It’s a good idea to plan the money talk wisely.
Paying for school is a team effort
For most university or college students, paying for school is a shared responsibility. According to Maclean’s, the majority of parents (67 per cent) will contribute, to varying degrees, to their children’s education; the same goes for the majority of students (77 per cent). Parents and students need to be on the same page for things to go smoothly. If micromanaging your child’s expenses may lead to a relationship breakdown, giving them carte blanche could spell financial meltdown.
Here are 7 helpful tips for creating a constructive money talk with your soon-to-be university or college student.
1. Establish trust, respect, and create open dialogue
So your child has made it to university or college. Let’s take a moment to appreciate the magnitude of this life event. Emotions are likely running high. You may even be struggling with some fear of letting go. Your son or daughter is now a young adult who will become increasingly independent in the years to come. Give them the opportunity to contribute to the money talk.
Begin by scheduling a time when you can all sit down and have an open dialogue. “We’d like to talk about your living expenses for next year. Can we sit down tomorrow and go over some numbers?” It will give your child some time to prepare so that the money talk will be more of a conversation and less of a lecture.
2. Explain the benefits of a clear and honest budget
In order to budget for the year ahead, parents and students need to have a clear understanding of what to expect. According to Maclean’s, the average annual cost of post-secondary education is $19,498.75 (for a typical student living off-campus).
Breaking this down into monthly or weekly totals will help your son or daughter learn how to monitor spending and manage different types of expenses: extracurricular activities, daily travel, travelling home, books, food on campus, groceries, tuition, rent, etc. A budgeting app might be what your child needs for tracking spending.
3. Discuss the purpose of student debt
Next, move on to all the different types of student debt. If your son or daugher will be using credit to help pay for school, make sure you both understand how the borrowed funds will be allocated. As a rule, student debt is considered “good debt,” especially when it pays for essentials, like tuition, books, and basic living expenses. But it can quickly become “bad debt” if credit is funding a spring break vacation or nights out at the bar.
Also, ensure you both understand the repayment terms. With government loans, repayment doesn’t need to happen until after graduation. But with lines of credit and credit cards, there will be monthly payments to cover interest charges. This is a great opportunity to show your son or daughter how to set up an automatic payment — why not one of your own? — through online banking.
4. Discuss the perils of wasting money
Make this part of the discussion two-sided. Talk about the difference between needs and wants and the importance of reminding yourself — do I really need this? — before making any purchase. It can help if you share your own spending triggers. You can then discuss some areas of temptation your child will encounter at university or college: eating out, going to bars, clothes, Ubers, video games, etc.
Using cash is still a great way of limiting spending, however, many budgeting apps (like Mint) will also send alerts when you reach a specific amount for set categories, like food and retail spending.
5. Teach them to embrace the thrifty student lifestyle
Students are often low on cash and that’s not always a bad thing. Many important life lessons are learned from surviving on a shoestring budget.
Food, for example, will take up at least 10 per cent of a student’s budget, according to Maclean’s. Many savings opportunities can be found by shopping strategically for groceries instead of buying food on campus. Is your son or daughter in need of some last-minute cooking lessons? Teach them how to make some of their favourite meals so they’re not reliant on eating out. It can also be a great bonding experience before they head off.
Convey to them that adopting frugal habits when you need to will come in handy later in life when your cash flow increases and you’re able to save.
6. Savings should still be a part of the equation
Encourage your university or college kid-to-be to save for their future. Even if they don’t have much money to put away, every little bit helps. Explain to them that it’s the habit of saving that’s more important than the amount they’re saving. Putting a spare $20 into a savings account, like a TFSA, is a better money decision than spending it on junk food.
Your money talk should touch on the crucial difference between instant and delayed gratification. Use this opportunity to discuss what they really want. A new computer, a trip, a car? If they start saving now, chances are they will be able to afford something great in a year or two.
7. Share your experiences – always a good closer
End the money talk on a positive note. Share their excitement by telling them about your experiences as a student, or during your first years of independence. What were the challenges you faced? What are the things you wished you did differently?
The goal for the money talk is to open the communication channels so that you can talk to each other throughout their student experience. Your son or daughter will go through some big changes in their first year of university or college. Celebrate those positive steps toward adulthood. Chances are they will still need you and rely on your advice when it comes to money.
Are you interested in learning more about student debt and your debt relief options? Read more here.
Did you know that carrying too much debt can have an effect on your emotional well-being? Recognize the signs here.
Do you have any stories or tips about managing money as a student? Join our conversation on Facebook or on Twitter.