Preparing to Send Kids to College
It’s already mid-August. Before we know it, our kids will be back in school. If you have college-age children, especially if they are starting college this year, you may find this discussion helpful.
When you consider the student debt crisis, COVID-19 lockdowns, and post-pandemic changes to the workplace, it’s never been more important for students to make the most of their college experience. And if you’re a parent who’s preparing to foot the bill and hoping to turn that extra bedroom into a hobby room, make sure you set clear expectations for what your child needs to accomplish before graduation.
Here are three discussion points that can help you, your spouse, and your child establish some ground rules. Hopefully, they can help you get a greater Return on Life from the next four years.
1. Academic expectations.
C’s may very well earn degrees, as the old saying goes. But while your child is no longer competing for a spot in college, that doesn’t mean they should start slacking in the classroom. Middling academic performance could jeopardize a scholarship your child earned. It could also make it more difficult to secure spots in selective classes and programs later in college — particularly if a post-graduate degree is part of the plan. Moreover, if your “A” student is suddenly struggling to get by, that could be a sign that he or she isn’t taking classes seriously or is dealing with mental health issues that you should address as a family. This is something to watch out for. It seems that the pandemic has contributed to mental health issues for many students.
Beyond engaging in their classwork to learn, students should use college to sharpen skills that will help them succeed in the workforce: time management, collaboration, perseverance, focus, and curiosity. Push your child to do more than get by and they’ll learn how to push themselves towards greatness.
2. Financial expectations.
In addition to building good work habits, college is also an opportunity to teach your child good money habits. Even if you can afford to pay for tuition, room, and board, you might have your child contribute to the total costs as well. Having some skin in the game might motivate your child to put in that extra effort to excel. For example, we require our children to at least take Direct Unsubsidized Student Loans. It gives them some skin in the game. It helps them build their credit, too. Under this program, they can only borrow $27,000 in four years of college. We may help them with repayment after graduation.
Of course, the costs of college don’t stop once the tuition and housing bills get paid. What is your child’s plan for covering basic living expenses? Have a conversation about part-time work, setting a monthly budget, the importance of saving and investing early, and using debt responsibly. This last point is especially important as many credit card companies barrage freshmen with enticing introductory offers including fine print they may not understand. It’s likely your student will have enough debt to worry about when they start working without adding a high-interest credit card bill into the mix.
3. Networking expectations.
For motivated students who want to build a glide path from the classroom to a good job, the resources at a college or university are almost endless. High achievers who demonstrate a commitment to hard work can form invaluable relationships with professors, administrators, counselors, alumni, and other mentors. Many schools have strong connections to local companies, community organizations, technical certification programs, and government offices. Joining student organizations can help students connect with their peers and start addressing issues both on campus and in the broader community. And all these contacts and experiences can be resources when it’s time to start applying to graduate school or looking for a first job. Talk to your child about how they plan to make these important connections and start cultivating their first professional network.
Ultimately, your child’s college experience will be what your student makes of it. Once you’ve set your expectations, you’ll have to give your child some space to find their best way to meet those expectations and prepare themselves for adult life. We can’t help with homework, but if you’d like to set up an appointment before move-in day, we’d be happy to schedule a meeting with you and your child and help him or her get started on the path to long-term financial success.
I think you’ll find this week’s second article thought-provoking. It shows how who we spend our time with changes as we age. That can make time management even more important.
Here are the links to this week’s articles as well as a brief description of each:
1. Wealth vs. Getting Wealthier.
When asked to recommend a personal finance book, Morgan Housel’s The Psychology of Money would be my first choice. It includes many practical recommendations to help you do better with your money. While I don’t share his blogs that often, I read them regularly. I’m happy to share this one with you. For many people, “the process of becoming wealthier feels better than having wealth.” The article reminds us that, when we invest, we should expect at least the occasional downturn. It reminds of us the importance of sticking around long enough that the odds of eventual growth will turn around in our favor.
2. Who do we spend time with across our lifetime?
The chart from Our World in Data in this article made me think. Adolescents spend most of their time with parents, siblings, and friends. This changes as we enter adulthood. We build new relationships along the way. Others transform and fade. In our later years, we spend an increasing amount of time alone. Looking at the chart and reading the accompanying discussion as well as this article – Scarcity is an Ally of Appreciation – reminds me how important it is to appreciate the time we have with our kids. This hit home, even more, the week that I’m writing this. Our family vacation got put off until the 13th. One of our sons – Michael – is not around that much. He spends time with his girlfriend and his high school friends. We don’t see him that much. We see our three other kids much more than Michael. Michael is much more social than the others. My wife and I were looking forward to having him with us on vacation. We purposely decided to travel out of the area, so he wouldn’t have the opportunity to do something with others rather than with us. Last weekend, Michael and some of his friends went to New York City for the weekend. Wednesday morning, we learned he has covid. Now he can’t come with us. According to the CDC rules, he may be able to join us, but that will depend on how long it takes for him to be asymptomatic. This article and the story I shared remind us why time management is important. Sometimes you should use your money to buy more time, too. Yes, how we spend our time – and who we spend it with changes over time. We should also take advantage of the time we have with our loved ones. You don’t want to lament lost opportunities.
3. Who Is to Blame for Inflation, 1-15.
While inflation fell slightly in July – 8.5% for the last 12 months – it remains elevated. Who – or what – do we blame for inflation? Can we hold any individuals or institutions accountable? After all, we’ve seen the highest consumer price increases in 40 years over the last 12 months. This article shares some of the key factors pushing consumer prices higher. Those at the top of the list get assigned the most blame. But the ones at the bottom contributed as well.
4. The Seven Habits That Lead to Happiness in Old Age.
Are there similarities between our well-being and a retirement account? Yes, at least according to Arthur Brooks. When it comes to investing, starting early matters. In one of my earliest blogs, I shared two charts showing the difference between how much you had to save if you started saving early and then stopped versus if you started saving later in life. Because of the power of compounding, you must save a lot more if you start late. Mr. Brooks draws a parallel to our happiness in old age. He says the sooner we start practicing the seven habits shared in this article, the greater the likelihood that we will be happy in our later years. Selfishly, I hope Mr. Brooks is right as I have already adopted these habits. I hope you have, too.
5. Winning the End Game.
When we retire, on average we have about 20 years left to live. Some may have as many as 30 or 35 more years. This results in about half of our investing career taking place before retirement. The balance is after we retire. While we work, we accumulate assets. We have one set of rules to follow. When we retire, we move to asset decumulation. The rules change, especially as it relates to taxes. This article provides a nice overview of a spend-down plan for the distribution phase of our investment career. This includes some thoughts on estate planning, asset protection, and planning for senility.
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Phil Weiss founded Apprise Wealth Management. He started his financial services career in 1987 working as a tax professional for Deloitte & Touche. For the past 25+ years, he has worked extensively in the areas of financial planning and investment management. Phil is both a CFA charterholder and a CPA.
Located just north of Baltimore, Apprise works with clients face-to-face locally and can also work virtually regardless of location.