If you’re the parent of a child already attending or about to enter college, you probably have a lot on your mind. That’s understandable.
College is an exciting time of life, full of big choices and exciting opportunities. But let’s face it, it’s also a stage of life that can bring temptations—money troubles in particular. If you have a few concerns about how your child will handle their money in college, you’re not alone.
I’ll never forget my own early financial experiences as a young college student—or the day I opened my first credit card bill and saw what I owed.
“Man, that was an expensive pizza!”
The folks who signed me up told me my credit card came with a free T-shirt and a pizza. I got both of those, but they were far from free. They came with consequences no one had warned me about.
It started with a few thoughtless purchases—a dinner out, a shopping spree for gifts—but it added up quick.
Somehow I hadn’t realized the stuff I was buying and enjoying on credit was going to come due as a bill. Throw in the student loans I had taken on, and I was getting into some serious financial trouble. Before I knew what was happening, I was 19 years old, $25,000 in debt, and—for a short time—even sleeping in my car.
But here’s some encouragement! I made it all the way back, got out of debt, and learned the right way to handle money. And your child can win with money despite a world of pressure to do otherwise. It’s true! As a youth pastor and speaker, I’ve met, worked with, and walked beside many young people who graduated college as strong budgeters with a clear plan for the future and no debt. So can the college student in your life!
The Big Five
While your children are in college, they can lay a solid financial foundation by focusing on just five priorities for managing their money. With this foundation in place, at least two great things will happen for them: They will be in a strong position to build wealth throughout their lives, and they will gain an awesome amount of self-discipline to help them in their careers.
- Save a $500 Emergency Fund. It might not sound like a lot. But $500 is usually enough to see a college student through most of the financial emergencies that come up, like a broken phone or computer. I know you’re going to want to help them out as you’re able, but it’s also a great idea to let a young person feel what it’s like to solve a money problem with their own money—instead of using yours or a credit card.
- Get Out of Debt. You probably remember from your own time on campus that college students are a major target for credit card companies. Help your child understand that going into debt is no way to start adulthood. If they already have credit cards, encourage them to cut those up and pay them off. The sooner they’re debt-free, the sooner they can begin using their money to go after their dreams.
- Pay Cash for a Car. Most college students will need a car either right away or soon after graduating. But the need for wheels is no excuse to take on a big monthly payment, let alone a payment that can end up costing you twice the value of the vehicle. Paying cash will save your child a lot of money—and they will get a lot more enjoyment from something they actually own.
- Pay Cash for College. You’ve probably noticed student loans are getting out of hand in America. In 2016, The Wall Street Journal reported that the average college student is graduating with more than $37,000 to pay back. That’s insane! Let your child know that paying for tuition and books is no different than paying for food and gas. By paying for college with cash, they’ll immediately be able to use their pay for things they want instead of paying off debt for years.
- Build Wealth and Give. This one is my favorite, because there’s no better feeling than the one you get while using your money to help those you care about. As the Lord Jesus himself said, “It is more blessed to give than to receive.” And who has the most freedom to do a lot of good with their money? Those who have been fortunate enough to stay out of debt and build wealth.
One more tip: It’s easy to assume you can only build this foundation if you begin early enough in life. Believe me, that’s not true! It’s never too early to start, but it’s also never too late! So be encouraged: Whether your child is just beginning to think about college or is already enrolled, they can apply these principles to take full control of their money—in school and beyond.