How to Have the College Money Talk with your Child

As parents, we strive for nothing but the best for our children. When it comes to their journey to college, financial obstacles can be overwhelming. No family should be caught off guard by the cost of college, resorting to excessive debt to cover education expenses.

We strongly encourage parents to initiate the college money talk with their children as early as middle school or freshman year of high school, before they even begin the college search. It is crucial to ensure that they have a clear understanding of the net cost of college and the amount they may owe in student loans after graduation. This knowledge empowers them to make informed financial decisions when the time comes.

Undoubtedly, the money conversation can be uncomfortable and emotional for many. However, fear not, for we are here to support you every step of the way.

The Reality of College Costs

First, it is important to understand the reality of college costs. According to a 2020 report by The College Board, tuition and fees at public four-year colleges have increased by nearly 40 percent since 2010. Private non-profit colleges saw an increase in tuition and fees of 33 percent while private for-profit schools reported a jump of almost 70 percent.

In addition, the average cost of books and supplies for a four-year public college student has also increased by $1,000 since 2010, now totaling around $1,500 per year. Room and board costs have seen an even greater increase, climbing up to nearly 40 percent during the same period. 

Every parent wishes they had started saving for college earlier. And every student feels a pang of guilt when they realize the financial burden this places on their parents (and themselves). But let’s move past the embarrassment and focus on the facts. Let’s discuss your savings, how much you’re willing to contribute, and identify the funding gap your student is expected to cover through loans, a job, or their savings.

The Awkwardness of Money Talks

Discussing personal finances with your children can often feel like navigating a minefield. The topic is fraught with anxiety, misunderstandings, and emotion. It’s not just about the numbers; it’s also about managing expectations and dreams. As parents, you might feel uneasy about disclosing your financial situation, fearing it could either burden your child or make them complacent.

Parents need to define and communicate a college budget so their child realizes the financial constraints. Knowing how much money is available to pay for college can help your child make responsible decisions about courses they should pursue and which universities are realistic options. By setting expectations early on, both parties understand what financial support they can provide throughout this process. This will also bring clarity to the process and help your child understand that it is a shared responsibility.

The Emotional Roller Coaster

This conversation is not just about finance; it carries an emotional weight. Your child may feel a range of emotions, from guilt and anxiety to frustration and disappointment. The key here is to approach the conversation with empathy and understanding. Remember, emotions are not a sign of weakness; rather, they signify the importance of the decision being made.

Encourage your child to ask questions and explore all of their options. Encourage them to explore scholarships, grants, work-study programs, and other means of financial assistance. Exploring these options can help your child stretch the budget you have in mind, without compromising on the quality of education they’re pursuing. 

Likewise, parents have the opportunity to consider augmenting their financial support through various means such as cash flow, tax credits, and potential gifts from extended family members including grandparents. This allows for a more comprehensive approach to providing for the needs of their children, ensuring their well-being and financial stability.

Discuss If and How You Want Your Child To Pay For Some College Expenses

When determining whether your child should bear some or all of their college expenses, it is crucial to establish clear expectations. This entails defining specific responsibilities for your child, such as seeking part-time employment or pursuing scholarships, to contribute to their college journey. By doing so, you are not only fostering financial independence but also empowering them to actively fund their college experience. 

It is also important to consider the type of college expenses your child will be responsible for so that they can plan accordingly. Discuss which items (tuition, living expenses, textbooks, etc.) and how much of each item you expect them to cover. This will help create a budget and payment structure that your child can adhere to as they progress through their academic career.

Finally, consider having your child open a savings account specifically for college-related expenses as early as possible. This will help them save money and track their progress toward meeting their financial goals. Consider incentivizing the process by matching your child’s contributions or setting up an automatic transfer to ensure they stay on track with their payments. 

Tips for Having the Money Talk

• Start Early. Planning is key – financial conversations should occur long before college applications are due or student loan decisions need to be made. The earlier you have this conversation, the more time you give yourself to prepare financially, come up with a budget, and plan for your child’s college costs.
• Be Transparent. Be honest about your family’s financial situation and make sure to discuss all of the options available to fund college, including grants, scholarships, student loans, and how much you can contribute. 
• Make It A Positive Conversation. Don’t make your child feel bad or guilty about their college aspirations. Use this as an opportunity to discuss and support your child’s plans and dreams while still being mindful of financial limitations. 
• Work Together On Solutions. Establish a plan together – both parents and children need to be involved in the conversation so that everyone understands what help is available and how it could affect the family financially. 
• Educate Yourself. Take the time to understand college costs, financial aid availability, and scholarships – this will help ensure that your conversations are productive and can lead to positive outcomes for your child’s future success. 
• Ask For Help If Needed. If you are having trouble navigating the college funding process, there are plenty of resources available to help. Consider reaching out to a college-savvy financial advisor or a college planning counselor for advice and guidance.  
• Continue The Conversation. Money talks don’t have to be one-time conversations – schedule follow-up conversations with your child so that you can talk about any changes in the family’s financial situation, discuss how your child is doing academically, and provide additional support as needed. 
• Celebrate Your Child’s Successes. It can be easy to focus solely on the financial aspects of college planning without recognizing your child’s hard work and achievements along the way. Acknowledge their successes and let them know that you are proud of their progress. 
• Consider Alternatives. If college isn’t the right fit for your child, there are plenty of other options available to them such as trade schools, apprenticeships, online courses, and certificate programs. Talk with your child about different paths they can take that may better fit their interests and skills while still providing them with future career opportunities. 
• Connect With Others. Having a supportive network of family, friends, and mentors can be invaluable during the college planning process. Reach out to those in your community who have gone through the same experience or are familiar with the college funding process to get advice and support. 

This conversation might not be easy, but it is essential. By taking the time to have the college money talk, you’re setting your child on a path to financial wisdom and making their college journey a little less stressful. 

Acknowledge that there will be challenges and mistakes along the way, but maintain a positive outlook and remember that you are not alone in this journey. Remember, the goal is not just to fund an education, but to teach them the value of money, planning, and making informed decisions.

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