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Ready to Launch: 5 Things to Discuss with Your College Student

| August 16, 2018
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In what seems like a blink of an eye, your child has gone from tentative kindergartener to high school graduate!  As the graduation celebrations commence, parents have a two month opportunity this summer to get their kids on the right financial track before college.  Here are 5 tips to help your college student launch a successful college career and beyond:


  • Talk About Debt

I’m not talking about student loans – that’s an entirely different (national) debate. I’m talking about the credit cards your newly 18 year old adult child will be receiving offers for.   Help your child understand that the power of compounding interest.

For example, if your student decides to put a few nights out, some clothes and maybe a pizza or two on the credit card, coming in at $500, and chooses only to pay the minimum credit card payment each month, that $500 will turn into $681.49, and will take 46 months to pay off (assuming a minimum payment of $15 each month and a 17% APR).

Understanding the need to pay off credit cards each month and live within your means is a powerful lesson that can set the tone for your child’s financial future.


  • Decide on a Budget


Many college students aren’t used to paying for everything in their lives.  While some students will have a meal plan, there are many expenses not accounted for.   Sit down with your young adult and help them think through items they’ll need to keep on hand, from toiletries and basic cleaning supplies to manicures and meals out.  Rather than sending them off to school with an endless supply of “free” goods from a family trip to Costco, help them figure out what it truly takes to be on their own.

Once you know what the budget will be on a monthly basis, determine how the money will be available.  Some parents may choose to match whatever earnings their student has over the summer, and require the budget to fit within that total amount, while others are comfortable with a monthly allowance.  Either way, set expectations early so your son or daughter knows what to expect.


  • Bail Out Plans

Let’s say your freshman has a rough semester, and overspends, either on the credit card or blows through their savings in the first month.  Determine for yourself what bail out measures you are willing to provide, and stick to it.  Without a consequence of some sort, you are destined to create a pattern of overspend and bail out from the bank of Mom and/or Dad. 

If you know your child has a spending habit, or may have trouble with a lump sum amount, discuss a monthly transfer option to prevent a disaster.  

Keep credit card limits low to prevent a compounding interest issue atop any mistakes.

Check in when possible and offer to be an accountability partner rather than a judge.


  • Crucial Planning Documents

Until a child is 18, parents have almost unfettered access to medical documents, and most parents are privy to the other information in their child’s life.  While your 18 year old may still be your baby, you are not entitled to any information.

Look into getting your child a HIPAA document, a healthcare power attorney, and where appropriate, a power of attorney document.  This will allow you to help your child and understand key information in the event of an emergency.  Your estate planning attorney can help you and your child determine the right documents for your family.


  • Break Time

School breaks offer excellent opportunities for work and travel.  Look at the academic calendar with your student and determine which breaks will be working breaks (i.e., time to get some hours in at their old job or pick up some babysitting gigs when they’re at home), and which will be travel breaks.

If your student envisions going on a fun Spring Break somewhere tropical, figure out in advance how much (if anything!) you’re willing to help, and set a budget around that trip.   Again, putting an entire break on a credit card may seem like a good idea when you’re 18, but when you’re still paying it off at 23, it will feel a bit different!


Enjoy the summer with your students, and congratulations to all of the Graduates (and their parents)!





Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Private Advisor Group, a registered investment advisor. Private Advisor Group and Price Financial Group are separate entities from LPL Financial.


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