For the past 12 years, your teen's been preparing for college—memorizing so many formulas, dates and techniques in the process that she could probably publish her own textbook series. And while college classes will be a litte harder than she's used to, she'll adjust. She'll also soon fit in with dorm life, make a lot of new friends and become a pro at studying after midnight.
But when it comes to money is she ready to fully manage her finances for the first time? As many hours as she's spent slaving over algebra, how much practice does she have at sticking to a budget or paying bills?
Many college students find out the hard way that handling money isn't easy. Spending is no problem, but after movie tickets, a new shirt and the pizza bill, is there enough left over for textbooks? Gas money? Emergencies?
Professor Tim Stebbings of Gordon College in Massachusetts has an up-close perspective on college students and money. He earned his undergraduate degree thirty years ago through a work-study co-op program, helped three children through college, was chief financial officer at Gordon, and advises students at Gordon through the business classes and seminars he teaches. Here are his suggestions for parents and teens preparing for the financial independence of college life:
How can students gain the financial sense and responsibility they'll need in college?
With our kids, we were probably not as intentional as we should have been. But to some extent, financial sense is more caught than taught. Our kids saw how we handled money, and what we valued. They viewed how we provided for them, and watched us choose the things we thought were important enough to spend money on. That went a long way toward shaping their view of how money should be handled. For example, as our kids started going to college, we talked about funding, and gave them options. Even though Gordon, where I work, offers significant tuition breaks for children of employees, all three kids chose to go elsewhere initially (our two daughters did graduate from Gordon). So my wife started working a full-time job to help us pay that expense. That said something to our kids about how much we valued them and their education.
There are things we can teach kids, like putting money into the perspective of our Christian lives. If we take the claims of Bible seriously, then we realize all of our money belongs to God, and that we're just stewards. We want to teach our children to approach money in that context. What are some strategies for training high school kids to deal with money responsibly? Parents need to identify more areas for which students will be responsible. Let them make decisions, and train them to handle limited funds. They will learn that there are always more "needs" than resources.
The art of personal budgeting is about making choices. That's what stewardship is. Outline things for which the child is responsible, and what the parent is willing to cover. From a young age, children need to learn that spending involves a choice. If they spend a dollar on one thing, they won't have that dollar for something else. But there are no definite rules on where boundaries should be set. That depends on a lot of factors, including the family's lifestyle and income level. And it varies with the child. At 12, some are ready to take responsibility for their lives; some at 35 are not. You as a parent need to judge.
Are most parents good financial role models?
It's an area in which we can all stand improvement. I can explain how money management should be done, but I have trouble doing it myself. I don't want to overdo the guilt trip. But we'll be held accountable for our choices, and the way we spend our resources. If we as believers are people of honesty and integrity, then that includes the way we handle our money.
Should there be a specific occasion when the family sits down and has a "Money Talk"?
For some families and some kids, that can be helpful. And an ongoing discussion of how funds should be used is critical. But modeling is so important.
How much responsibility should students bear when they go to college? What kind of financial "parental safety net" should be in place?
Kids need to have a clear understanding what their parents provide. In our family, for example, we pay for the basic meal plan, tuition, and room and board. Our children are responsible for books, transportation, food, entertainment, clothes and other everyday living expenses.
By bailing out children too often, parents may not be helping. Sometimes the best way for them to learn is to live with the consequences of their decision. Maybe that means less pizza for a semester, or maybe they need to take on a part-time job. Part of helping your kids become independent is letting them grow up, make mistakes and live with the consequences. In dealing with those consequences, they are going to have the experiences that will most help them learn—and avoid making the same mistakes again.
What role should the credit card play in the financial life of the college student?
These days I hear kids saying, "I can't live on what I'm earning. I can't even live on what I'm spending." Kids are getting themselves into a hole right away, not just borrowing to go to school, but also with credit card debt.
When students ask my advice about an investment portfolio, the first question I ask is about credit card debt. Most investments never pay a consistent return as high as what they're paying the credit card company.
Credit cards are handy for emergencies, and for securing things over the phone. But students have to ask themselves, "Do I have the funds to pay for that this month, or next month?" My son refuses to get a credit card, and I think part of it is that he doesn't trust himself. For him, it's probably a good decision. Other young people may be ready to use credit cards without fear of getting overextended.
It's human nature to want to make money, but giving money away isn't as easy. How do you teach your kids to tithe?
For one thing, they see letters come in the mail from charitable groups. That shows them we put a priority on giving. They also see in us a pattern of consistent giving to a local church.
In our material society, we want to define success in financial terms. I'm not a subscriber to the "health and wealth" gospel. We're told to seek the kingdom of God first, and the amount of money we make should not define our self-esteem or worth. A pastor once said, "Down here on earth, we trample other people to get the gold; in heaven, we'll be walking on the gold, trying to get to the people." The impact we have on others is what it's really going to come down to. Wealth is a distraction from godly priorities.
At what point should parents separate themselves from the financial lives of their children?
Once the students are out of school and have their own jobs, we as parents need to remain open to discussing finances, but it's going to be at their initiative. Trying to keep our hands in their financial business when they are in fact independent is unhealthy. I've heard this motto for raising kids: first give them roots, and then give them wings. When they start living independently, they need to make their own decisions.
Interview by Steve Hendershot
