Laura Shin, Contributor
I write about personal finance, business and the economy.
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The Lesson: When comparing colleges, be sure to consider how much each school would cost.
Search for the “net price calculator” on college websites to see how much each costs when including other expenses besides tuition. But don’t let the price tag discourage your child. Explain how much more college grads earn than people without college degrees, making it a worthwhile investment.
Activities For Ages 14 To 18
1. Discuss how much you can contribute to your child’s college education each year. “Every parent should start the college cost conversation by ninth grade,” says Kobliner. “Tackling the subject early and being honest about what your family can afford will help kids be realistic about where they may apply.”
But remember that there are many ways to finance college other than with your own money. With your child, look into which private schools are generous with financial aid, how much of it is in “free money” such as grants and scholarships, how much in loans that your child will have to pay back, and what government programs can help pay back those loans, says Kobliner. Also, check out these eight tips on taking out student loans.
2. Have your child use this College Scorecard to compare how much each college costs, what the employment prospects of graduates are, and how much student loan debt could affect your child’s lifestyle after graduation if he or she attended that college. As with any investment, analyze together whether the money put in will pay off in the end.
3. Estimate your financial aid using the FAFSA4caster tool at fafsa.ed.gov. Also research additional loans, scholarships, and grants — and use calculators to estimate monthly loan payments — on studentaid.ed.gov. Find out about loan repayment options such as Pay As You Earn, which limits your monthly payments to just 10% of your discretionary income. For more information, check out ibrinfo.org or finaid.org.
“Parents should absolutely make their college kids get a part-time job,” says Kobliner, adding that research by Dr. Gary R. Pike of Indiana University-Purdue University Indianapolis shows that students who work 20 hours a week or less at on-campus jobs get better grades because they’re more engaged in student life. “But limit those hours!” she says. “Working more than 20 hours per week can hurt kids’ academic success.”
The Lesson: You should use a credit card only if you can pay the balance off in full each month.
It is all too easy to slide into credit card debt, which could give your child the burden of paying off credit card debt at the same time as student loans. Plus, it could affect his or her credit history, which could make it difficult to, say, buy a car or a home, or even to get a job. Sometimes, prospective employers check credit.
“The average household owes $7,084 in credit card debt. To reverse the trend of spending beyond our means and racking up hundreds of dollars a year in interest, it’s critical that parents teach their kids how to use credit cards responsibly (or better yet—not at all!—unless they can pay the total bill every month),” says Kobliner.
Activities For Ages 18+
1. Teach a child that if a parent cosigns on a credit card, any late payment could also affect the parent’s credit history.
3. Explain that it’s important not to charge everyday items so that way if you have a emergency expense that you can’t cover with savings, you can charge that. However, even better is building up at least three months’ worth of living expenses in emergency savings, though six to nine months’ worth is ideal. Learn here how to budget money in order to build up emergency savings.
Photo: MIKI Yoshihito/Flickr