The day is approaching when high school seniors receive their diploma, hug their parents, and set their sights on the next step in their life–college. It is an exciting and, sometimes, terrifying time for students and parents alike.
Many parents are concerned about their child’s ability to manage their finances. And the concern is understandable. Financially, the college years can be difficult for students. Student loan debt is now the second largest debt category in America, behind mortgages. Students graduate with an average above $37,000 in student loan debt. Credit card debt is pervasive as well. Twenty-five percent (25%) of college students graduate with $5,000 in credit card debt. Ten percent (10%) graduate with $10,000 in credit card debt.
Many students owe a significant amount of money before they receive their first “real” paycheck. Some graduates don’t financially recover from their college years for an entire decade. So how can you, a parent, help? Talk to them about it.
Consider teaching your high school senior these money lessons:
1. Money is the result of work.To some degree, your child has relied on your ability to provide. And they may continue to do so through college. But your student needs to understand that money doesn’t magically show up in a bank account. Help them understand that behind every deposited paycheck are hours of work, sometime very hard or stressful work. Talk about how you work to provide for them. Money is something they should respect and be grateful for.
2. Money is finite.When the bank account hits zero, there is no more money to spend. To ensure that the account does not hit zero, a plan is needed (some call this a budget). Walk your child through the budgeting process. Use numbers and expenses that they may experience in college. Tell them that this is their plan to avoid debt.
3. Debt is a burden. Tell them about your experience with debt. Talk to them about the statistics above. Help them understand that those who have that type of debt often carry it for a really long time. Student loan debt is forcing college graduates to delay goals, like owning a home, for several years. You can easily graduate in your early twenties and still be paying the bill in your thirties. Let your child know that credit card companies don’t give them money—they give them loans with very high interest rates and expensive penalties.
4. Instant gratification often leads to delayed financial health. There will be endless opportunities to spend money in college. Encourage them not to fall into the spending trap. Explain the power of delayed gratification—obtaining something great in the future by postponing something small in the present.
5. A little bit of money + A lot of time = A lot of money. Now is the time to start saving for retirement. Seriously. Undoubtedly, retirement seems really far off to them. But this is exactly the reason why they should save now, giving compounding many years to work its magic. Show them the chart in this article. A little bit of money + A lot of time = A lot of money.
6. God is the owner and provider of everything. All money is God’s money. This necessitates good management of money. Share the Parable of the Talents with them. Show your child how God provides us with money to ultimately advance his Kingdom. Show them how God uses our financial generosity to impact lives for his sake.
Set your high school senior up for future financial success. Help them avoid becoming another debt-laden college graduate. Help them to give generously, save wisely, and live appropriately.