Have a high school senior heading to college this year? Start your financial prep now.
By Lyle Wolberg
For many families, including my own, the college countdown is heating up, and all kinds of preparations are underway for this major, life-changing milestone. Our twins, Katie and Joey, will be graduating and heading off to college in a matter of months. As a wealth advisor for the last 24 years, I’ve made recommendations to hundreds of clients about what to do during this pivotal time. Now, it’s our turn — and maybe your turn, too.
If you are just now getting your high school senior a bank account and on a budget, then it’s probably a little late. By now, your child should have his or her own bank account with a debit card and have some experience with monthly budgeting for gas, lunches, entertainment, etc.
Here is a timeline I would recommend for the next six months to make sure your soon-to-be graduate is financially well prepared.
March: Acceptances will be coming this month. It’s probably best not to compound the stress by injecting a lesson on money skills. But, I would definitely discuss with your child the costs associated with each school where they’ve applied. It’s important to explain before a college choice is made what your expectations are regarding your child’s portion of the costs. It might be that an in-state choice does not require your child to work, while an out-of-state private school will require him or her to take out a loan or get a job. Now is the time (before final acceptances are due May 1) to have these “adult” conversations with your child. If he or she needs to contribute to college costs, now is the ideal time to start talking about getting a summer job.
April: Decisions are due by May 1, but by now, your child knows where they’ve been accepted, denied or deferred. Most scholarship money has also been granted for each school. This is the month when you and your child really need to sit down with pen and paper and map out each choice. Don’t sugar coat the hard things. If you son is going to have to take out a loan or work during school, tell him now. Most colleges have a good idea of all tuition, living, book and entertainment costs for students. Take advantage of friends and relatives who have kids at the schools your child is thinking of attending to get a “real life” example of all the costs to expect.
May: It’s graduation time. Talk to your child about looking for employment at their school of choice. Too many kids will wait until they get to campus before they start looking for jobs. Why not start the job search now? Start working on a monthly budget so your child knows all the costs and what he or she will receive from you. Also start planning for the moving and start-up costs associated with college. Dorms need to be decorated, and sometimes lofts need to be built. It’s a good idea to talk to your child about these costs so they can communicate to friends and family what they would like as graduation gifts. iTunes cards are great, but Target, Home Depot and Amazon cards might be a bigger help when it comes buying all the supplies needed for college move-in. Check with the high school counselor to make sure that all scholarship opportunities have been taken advantage of.
June: Start setting up a local checking account on campus. Get your child used to the online banking and mobile app for the bank of your choice. You need to impress upon them that you will be giving a certain amount of money on the first of each month, and it’s their responsibility to make sure they don’t run out of funds before the end of the month. Explain overdraft and other fees that the bank will charge. Look at ATM fees, and make sure they know which ATMs they can use without incurring additional fees. Now is the time to discuss credit cards, as they will probably be inundated with offers to sign up for really “cool” looking cards with their college colors and logos on it. I do not think incoming freshmen need to establish new credit card accounts. They should do so later in their college careers. With all the changes occurring, it’s best not to add debt to the equation now.
July: Finalize the budget with your child. Create a spreadsheet that both of you can view to track costs versus the budget during the school year. Getting your child to understand how a budget works is one of the most important lessons we can teach before they leave the house.
August: It’s time to say good-bye and shed some tears. Hopefully all the work you have put in will pay off. The gift cards for the bedding, school supplies and clothes should have come in handy when costs really start to mount. Have your child confirm employment if they were able to secure a job. Otherwise, encourage them to continue their search. Make one last search to be sure there aren’t any remaining scholarships from local groups that have not been claimed or awarded. Many times, local businesses have scholarships that are granted to local students that never get used. Kiss ‘em good-bye! Don’t worry – the first time they run low on money, you will be the first one they call!
Lyle Wolberg is a senior financial life advisor and founding partner of Telemus, a leading independent advisory firm providing investment, asset management and wealth advisory services for high net worth individuals. The company is based in Southfield and Ann Arbor with offices in Los Angeles and Chicago. Learn more at telemus.com.