You’ve met the roommate, stacked the bunk beds, and taken him out for one last dinner. Before you left you loaded his bank account with cash. Quick hugs, and then, you drove home crying. Three weeks later, you get the first plaintive call asking for more money. If your kid has poor money skills and a complete lack of spending discipline the flying monkeys can arrive before the first set of midterms.
How do you make sure this doesn’t happen? It’s not easy. We want our kids to be happy, and oftentimes, that means most of us are soft touches — making up shortfalls or slipping an extra twenty in a beach bag. They know that if they look sad enough long enough, we will cave. Are the pitiful calls and texts really that surprising? We’ve always come through in the past. So what do you do?
End the Free Lunch Early
If you’ve got a year or two before the big departure, there’s plenty of time for your teen to get a job. Nothing beats a job for teaching money skills. NOTHING. Two weeks of mournful sighs isn’t going to cut any ice with a boss. The pay won’t be much but the education is priceless. The arrival of the first check is a momentous occasion — while the deductions are tiny, they are there. To a 15 year old expecting a $47.74 check, the arrival of $39.33 is shocking. The outrage that ensues can be epic! Withholding, social security, state versus federal taxes — when the sound and fury dies away, this is the moment to explain how a real paycheck works. It’s also the moment to take your teen to the bank and open his first checking account and get a debit card (without overdraft protection). Set it up and start him on the path to managing and budgeting her own money.
At this point, too, it’s time to phase in some expectations and limitations on how your teen spends his income. Bills plunked down on his bed or desk have a wonderful way of concentrating attention and reinforcing the idea that bills he incurred must be paid with money he earned. If he doesn’t pay the ON DEMAND bill for shows he watched? Hey, guess we aren’t going to catch the premiere of Game of Thrones after all. If he leaves the family car with the fuel warning blinking, well, he has to fill the tank to the brim before he gets it again…and bring it back full the two times after that as well.
Just how much is too much?
Still, no matter how good a job you do teaching your kids about money, they will hit a pothole or two going out on their own. That’s why, before the car is packed, you should sit down together and work out a budget on the expenses you can reasonably expect….and are willing to fund.
What are those? Hard and fast rules are tough to come by these days. Yes, books can be a huge expense — but these days, just the STEM students are running up big bills here. Everyone else is using the internet or the library. You paid an activities fee with the tuition bill so many of campus events are free. When it comes to meals, schools use dip cards these days — cards that work for however many meals you buy from the meal plan for the term. At many schools, during these meals, your teen can load up on sodas and snacks to take back to the dorm. Most colleges offer a health insurance plan that doesn’t involve a co-pay. Transportation? Large universities have their own free bus systems circling campus throughout the day. Most also make regular runs into nearby towns to groceries, movies, and shopping centers.
So what expenses will she have? In the vast majority of cases of kids living on campus, they’ll need money for meals off campus, laundry, and trips to the drugstore. If your teen takes a car, add in parking permits and some gas money. Remember, we’re talking about 18-20 year olds here. You have a kid with a meal plan who says she needs more than 50 bucks a week, it’s reasonable to suspect she’s got a 21 year old connection who is buying her beer to host dorm parties. Or one who is having a wonderful time visiting friends on other campuses every weekend.
Sit down together and work out what you’ll pay for and what you won’t. For instance, you’ll pay for trips home on holidays, but gas money for any weekend trip is his responsibility. You’ll pay for books and lab fees, but any parking ticket is his problem. The same applies if you give your teen with an “emergency” credit card. You’ll be amazed at the sheer creativity you’ll see in defining an “emergency” if you don’t clearly state exactly how and when the card is to be used. So be specific. Flat tires, yes. Allergy meds, yes. Midnight pizza, no. Explaining exactly what the rules are in advance is the key.
The Inevitable Screw Up
All this said, there will be “moments”. Of course, every kid is different and when they are 19 or 20, they aren’t exactly kids anymore. How do you “punish” overspending? Well, if there’s a credit card involved, you can suspend it immediately. If it involves parking tickets (“my assigned spot is so far away”), you can state how much you had planned to give her for Christmas and deduct the payments. She knows she screwed up. She isn’t proud of it. You don’t need to twist the screws. You certainly don’t want to her coming home for Christmas dreading a confrontation.
Nor do you want the repercussions to be so draconian that your teen turns elsewhere for help. Remember, at 18 years old, your kid is a legal adult — and very capable of getting a credit card. What’s more, these days, banks attend orientation week at schools across the country. They form piranha-like swarms around the freshman offering them tee shirts, beach towels, beer cozies….and “student” credit cards with credit lines between $750 to $1000 and interest rates that skyrocket to the 20% range rather quickly. They stuff student mailboxes with offers throughout the semester. A teen eager to hide a $210 parking fine is red meat.
Stay Calm, Stay Involved, and Carry On.
Bottomline, even the most responsible teen’s inexperience will show at some point. He will need your help. He simply doesn’t know that all parking tickets have to be paid by semester end or he won’t be allowed to register next term. He doesn’t know that overdue fine on the library book gathering dust under his bed isn’t .25 a day any more….no….The library declared it a lost book after a month and he’s being charged $433.36 for a replacement. He doesn’t know what the bankers know — chances the credit card he opened “just to pay the fine” will be maxxed out within six months are around 99%.
It happens. When it does, it can end up costing you and your teen a small fortune. So stay involved and monitor the situation:
- Keep your bank account linked to your teen’s checking account.
- Check the balance on the “emergency” credit card frequently.
- Use CreditKarma to see if your teen has succumbed to the bankers’ credit card spiel.
- Look over the monthly statement from the university.
If you never see anything, you’ll never have to say anything. But if you do, you can help your teen recognize the problem and work his way through it. That’s when you’ll see if you’ve raised a financially literate kid, capable of solving a problem, bouncing back and standing on his own two feet as an independent adult.
You will make it there. Just stay calm and…keep a little cash handy.