Some Skin in the Game

We had an exciting collegiate weekend. My daughter and I went on our first college trip! Yes, she is only a sophomore and I know it’s early to be looking. However we combined the trip with a visit to see my very good friend and her daughter who moved from our town about five years ago.

Our first information session and tour was at the University of Pennsylvania and then we headed to the suburbs of Philly for the same sessions at Villanova University. (I’m not going to review our visits but if you want to read more about parenting your college bound teen – check out a friend’s blog Bound 4 College.)

From our college visits, I could see that there are two main concerns (besides how’s the food and are the dorms co-ed) – how to get in and how to pay for it! Going to college is a financial partnership between you and your child. So it’s probably a good idea if your teen has “some skin in the game.”

Last week, the Wall Street Journal’s article Before You Choose That College asked some financial advisors for some advice on this partnership. There were five interesting pieces of advice:

1. Encourage your teen to explore some careers choices first, then look at appropriate schools.
2. Don’t promise your teen that you’ll pay the entire tuition – with the latest economic downturn some parents have had to revise their promises.
3. If deciding between schools with different price tags, make your teen responsible for at least some of the difference if they choose the more expense school.
4. Make school their #1 priority, if they underperform then you’re not paying anymore.
5. Once your teen is 18 years old, you will no longer have legal authority to access their health records or finances – you will need the appropriate legal documents to address the unexpected.

While you may not agree with some of the advice, it is worth considering some of the ideas. Remember an education is an investment in your teen. By having them take some of the financial responsibility it may make them more committed to picking the right school and for them to work hard once they get there. The last piece of advice on getting the correct legal documents (health care directive, HIPPA release and power of attorney) can’t be overemphasized.

We still have a few years before we will be writing out the big tuition check, but I am already thinking about how to pay for it and how much “skin” my daughter will have in her college game.

In case you want to know, my daughter told me that she was energized by our college visits and is now excited about the whole college experience. That’s a good thing, because she’ll have to keep up her end of the partnership.

Emptying the Nest

Check out this interesting interview by AOL Parent Dish “Emptying the Nest: Q&A with Author Dr Brad Sachs”. In the interview he talks about financial self-reliance in today’s environment and how you shouldn’t link allowance to chores. I will second his comments!

What I liked most about his Q&A was that he spoke about developing a self-assured child and helping your child to become an independent young adult. I am looking forward to reading his book "EMPTYING THE NEST: LAUNCHING YOUR YOUNG ADULT TOWARD SUCCESS AND SELF-RELIANCE." You can check out his website for more information.

By giving your kids and teens an allowance, you will be giving them the life-skill of financial responsibility. Hopefully this will help you to successfully launch your kids and teens from your nest towards being a self-reliant young adult!

Packing for College – the financial stuff

I have quite a few friends who will be packing up their college bound teens this month for their freshman year. I personally am a few years away this big event, but it got me to thinking about how to prepare my daughter and our family for college. I’m not talking about the traditional preparations like paying for college, packing the car or preparing for my tears after we drop her off. It’s all the miscellaneous financial matters we will need to consider such as spending money, credit card for emergencies, small mortgage for text books and health/home owner/auto insurance coverage from afar.

This summer we opened up a checking account with an ATM/debt card for my daughter. She’s had a savings account since she was 5 yrs old so I thought this would be a snap for her. However, it has taken her a few months to get used to whole idea of ATM machines, writing checks, swiping debit cards and checking her balance on-line.

We are happy to report that she has been depositing her allowance and her summer paycheck into the checking account. She’s been learning to use her debit card and the ATM for the movies and trips to the mall. Plus she wrote her first check to pay for her driver’s ed class. This was all in the name of financial education but I didn’t realize that I was also preparing her for college life.
Don’t wait until your teen is leaving for college to open their first checking account. It’s important for them to learn to use an ATM and write a check. Having a debit card will get them ready for a credit card. Learning to only spend what you have in your account is a valuable lesson in preparation for using credit wisely.

The Wall Street Journal’s Personal Finance section has three great articles on the subject of college and finances that are worth your time to read:

“Packing for College, 2010 Style” by Karen Blumenthal – great advice from checking your health insurance policy for coverage at college to home insurance policy covering dorm contents to credit cards for your college student.

“How to Tame College Costs – It’s not Just Tuition” by Anna Prior – great information on all the hidden costs of college life.

“When Student Loans Live on After Death” by Mary Pilon – sad article and hopefully you won’t have to deal with this issue but important information to know about co-signing private student college loans.