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 What college-bound children learn now about the difference between
grants and loans and compound interest could make a world of
difference when they graduate.
As New York parent Eric Yaverbaum says, "Fiscal responsibility is
worth taking your best shot to teach."
Here are four tips from parents on getting kids to listen and learn
about money:
MAKE FUTURE LOAN PAYMENTS REAL
When Cary Carbonaro's stepson was choosing colleges four years ago,
he was deciding between in-state schools and private colleges, with
price tags that differed by about $5,000 a year. Carbonaro, a
certified financial planner in suburban New York City and author of
"The Money Queen's Guide," did the math.
The stepson's loan balance of $20,000 for a private school would
mean a monthly payment of $300 for 10 years.
"Can you live with that? It will be like having an extra car
payment," Carbonaro asked him.
When Carbonaro's stepson decided to go to the private school, she
went the extra step of having him sign a contract that detailed his
financial responsibilities as well as those of Carbonaro and her
husband. The stepson worked part-time through school and recently
graduated with a degree in biology. "He has been on his own
financially since the day he graduated," Carbonaro said proudly.
CALCULATE FUTURE EARNINGS AND BUDGETS
Eric Yaverbaum's son, a high school senior this year, has narrowed
his choices down to two schools: one costs $60,000 a year and the
other is $32,500 with grants. Yaverbaum, who co-wrote a book on
college admissions with his older daughter in 2010, wants his son to
make an informed choice.
A post-graduation budget, based on expected earnings, is a good way
to get grip on the impact of college finances.
The first draft was unrealistic, so Yaverbaum helped his son drill
deeper into potential expenses such as the percentage of income
needed for rent, how much car his son could afford, and estimated
monthly student loan payments.
"It hit home," Yaverbaum said. "I don't think the finances of
college would have impacted him one iota if we hadn't gone through
all of that."
MORE AND MORE SPREADSHEETS
Having teens create spreadsheets to evaluate college costs is a
common parenting tactic. Meg Clough, a mother of three in Belmont,
Massachusetts, required her children to formulate a detailed
analysis on an Excel spreadsheet - from scratch, with no help from
siblings. Her two older daughters both recently graduated from
college and are gainfully employed. Her son just made his choice for
next year.
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"It took him five rounds to get all the details and get them
correct," Clough said.
There was not a huge price differential between his top choices. Yet
Clough's son kept forgetting items like travel and books, and he
grossly underestimated his spending money needs at first.
Clough's son now plans to earn $3,500 over the summer with two jobs,
as a waiter and a lifeguard.
"The 'aha moment' for him was when he realized what it all added up
to," Clough said. Another revelation: you do not pay back only the
loan amount, there is also interest that accumulates.
SHOW GRATITUDE
When mom is a college counselor, her kids tend to pick up a few
things. College and money were constant topics around the dinner
table at Cynda Mullikin's house in Galveston, Texas, but when her
son was picking out colleges last year, that did not make paying for
it any easier.
Although her valedictorian son was eligible for free, first-year
tuition at any Texas public school, he wanted to go to a smaller,
liberal arts school and maybe even go out of state.
Mullikin explained, with spreadsheets, that he would need
scholarships and loans to cover the shortfall.
He landed $32,000 in renewable scholarships, which will be enough to
cover the bulk of his costs if he keeps up his grade point average.
"He worked his little tail end off. That boy made so much money,"
said Mullikin.
Mullikin encouraged him to write thank-you notes to each
organization that gave him money. His roommates recently saw him
crafting these notes and started to tease him. But the pay-off is
worth it. "One gentleman appreciated his handwritten thank-you note
so much that out of his pocket, he gave him $500," Mullikin said
What did her son do? He wrote another thank-you note.
(Editing by Lauren Young and Matthew Lewis)
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