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5 Financial Lessons to Teach Your Kids Before College

Too often kids head off to college and take out the maximum amount they are eligible for in student loans, rent a nice apartment, and have fun going out with friends with little regard to the amount of money they spend. They may rationalize that they will only be college students once, and now is the time to have fun. However, that fun can rapidly come to a halt when they attend the financial aid exit seminar before graduation and realize just how much those student loans will affect their lives once they graduate.

If you have high school students and haven’t taught them financial lessons pertaining to college, now is the time to sit them down for a discussion. (Even if you have been teaching them financial lessons all along, reviewing what they know is a good idea.) Here are some topics you may want to tackle with them:

1. How to create a realistic budget. Talking about a realistic budget is one thing, but why not take it a step further and actually give them the chance to manage the budget. Maybe you could put them in charge of the grocery budget for the month. They get a certain amount of money and have to buy all of the groceries for the month. Or, some parents give their children a clothing allowance, and the kids have to buy all of their clothes out of that money. When the money is gone, it is gone.

2. How to shop for a bargain. Hand in hand with teaching them how to budget is teaching them how to find a bargain. Teach them about the deal sites to save money on entertainment as well as how to use coupons. There is nothing wrong with heading to the thrift store to find a few items. (The thrift store might become essential if they try to extend their clothing allowance.)

3. When the gravy train ends.  Parents often take their kids out to eat and pay for the kids’ meals. The problem is that this arrangement often never ends. I have a friend who is thirty and still expects her parents to pay for her when she goes out to eat with them, and she goes out with them a few times a week. Let your kids know when the gravy train ends. What are you willing to do for them financially in the future, and when are they expected to stand on their own financially?

4. How to choose their college major carefully. Too often kids pick their college major based on what they enjoy or what they are good at, with no regard to the earning potential of that job. I majored in English because I love to read and write, but a B.A. in English doesn’t get you very far. I had to go on to pay the expense of graduate school before I could actually use my degree. Is there a way your child can blend their passion with a career that can actually earn them money when they graduate?

5. How much they will pay in interest over the life of a student loan. Student loans can be essential to help students pay for college. I don’t have a problem with student loans, per se, but I do have a problem with college students maxing out their student loans to live the good life while in college. Teach your kids how much they will have to pay back monthly, and how that compares to the average salary they will make. A $500 student loan payment can certainly have a damper on their post-graduation way of life. Also, show them how much they will pay in interest over the life of the student loan. It’s okay to take out loans, but just take out the minimum needed.

What financial lessons did you teach your kids before they went to college? Which financial lessons would you add?

(Photo: pagedooley [3])