Congratulations – your pride and joy is getting ready for college. But how prepared is your child to achieve financial independence in the coming years? This quiz can help you find out.
1. When did you start teaching your child about finances?
a. In high school
b. In middle school
c. Not yet
2. How many of these concepts have you explained to your child: interest, credit ratings, loan payment schedules?
a. All three
b. One or two
3. Did your child buy a car in high school?
4. Do you have open discussions with your child about money – including your own financial struggles and limitations?
5. What advice have you given your child about credit cards?
a. Get as many as you think you need
b. Get one and use it wisely
c. Avoid credit cards entirely
d. We haven’t discussed it
6. Have you helped your child seek out and apply for scholarships and loans?
7. If a four-year college costs more than your child can afford, have you discussed community college?
Give yourself one point for each correct answer.
1–b Experts say that parents should start discussing finances as soon as their kids are old enough to understand. “I think the middle school years are a good time to start,” says James Boyle. “That’s when a student is starting to have a greater awareness of the world of commerce.” Marcia Weston adds, “I think the minute a student either gets an allowance or starts to work, there needs to be an understanding of how they deal with money in their lives.”
2–a Don’t overestimate your child’s financial knowledge – even basic concepts like interest are confusing to many students. As Weston says, “A lot of students feel that if they sign loan papers, then drop out of school, they don’t have to pay it back because they didn’t get their degree!” Don’t let that be your child – explain financial concepts to them yourself.
3–b Money spent on major purchases like automobiles is money that’s not available for college. And students’ first cars often require frequent repairs, eating up even more of their hard-earned cash. Besides, many universities forbid freshmen to have a car on campus. Unless they absolutely need it for work or school, students should try to avoid this purchase as long as they can.
4–a Talking about money with your kids isn’t always easy, especially when your own financial history is less than perfect. But as Boyle points out, “A little humility can go a long way. By telling a student about the time you bounced a check, or didn’t make a payment on time, it brings a note of reality to the discussion. It helps you get across a warning in a way that shows that you once walked in the same shoes.”
5–b In Boyle’s view, “One credit card is plenty, in case of emergency or situations that require it. But multiple credit cards can lead to a false impression that you have more money than you really do.” A credit card doesn’t have to be an invitation to overspend: Just ask Tamanika Ferguson. “I had one credit card in college,” she says with a laugh. “I still have it, and it’s had the same credit limit the whole time! I don’t use it at all.”
6–a According to Weston, “Many students don’t even know, when they sign a loan paper, how much they owe.” Parents can walk their kids through scholarship and loan applications, clarifying confusing terms and making the process seem less intimidating. Paperwork isn’t fun, but it’s worth their time: Ferguson estimates that she spent around 500 hours filling out the applications that generated $80,000 in scholarship cash. That averages out to $160 per hour – a lot more than you can make delivering pizzas.
7–a From an employer’s perspective, where you started college matters less than where you finished. As Boyle says, “With the continued rising costs of college, community college is a very smart option. If a student spends their early years in community college then moves to a four-year university to get their bachelor’s degree, the total cost of that degree is less.”
6–7 points: Good job! You’ve prepared your child well for the financial challenges ahead.
4–5 points: Not bad, but a bit more financial dialogue wouldn’t hurt.
2–3 points: It’s probably time for a serious conversation about money.
0–1 points: For your kid’s sake, talk to them now – before they get their first credit card!
For more information on applying for financial aid and scholarships, or on financial literacy, contact Alicia Frey, associate director of financial aid at WVNCC, at [email protected] or by calling 304-214-8845.