I don’t know many families that have not had financial issues on their mind lately. It seems that in our household money–and how to manage it–is a constant topic of conversation with our own two kids as they nagivate early young adulthood. Then there are my parent-friends who are struggling with decisions about where to send their students and how much college is going to cost them. Add to the other discussions about how much to support them after college and you can tell that we have an opportunity to examine our own anxieties, beliefs, and behaviors about money.
A recent report on the financial concerns of young people hit home with me. What does it say about where we are as a society that our teens don’t feel confident that they will be able to be completely self-sufficient by the time they are in their 30s? To me, it says we need to do a better job of educating ourselves–and our kids–about how to navigate the economic landscape even in the face of uncertainty.
Before I launch into some ideas I have based on my own experiences with college students–my students and my own–let me make it clear that I am not a financial expert and any actions you take with your money should be done in consultation with such an expert.
However, I can share what college students are thinking and feeling about this issue and provide some suggestions for conversations you can have about it. In the end, I believe in the idea that knowledge–and well-reasoned discussion–is power.
- Talk about money. Not talking about it just increases the anxiety. Of course, how you talk about it is as important as what you say. Try to eliminate that “tone”–you know what I am talking about: The one where you feel it necessary to point out how idealistic or unrealistic your kid is and you repeat the phrase “Money doesn’t grow on trees!” Instead, ask questions about what they know and don’t know and then go from there.
- Discuss needs and wants. Is a Netflix account a “want” or a “need”? If you “need” a phone, would you be better off with a much-less-expensive refurbished one rather than the latest, and most expensive one? These kinds of questions can lead to conversations about what is important to them, and to you, and how to set monetary goals to achieve them.
- Be clear about what you will contribute and what your student will contribute to an expense. This is especially important for young people who are in college. In many cases, they must rely on significant monetary support from parents. However, your student can also easily contribute something as part of the ongoing arrangement for that support. Some parents request to see their students’ grades each semester to continue paying their tuition. Other parents require their students to work during the summer to earn money for educational and personal expenses. Whatever your arrangement, make it clear what you will do and what you expect in return.
- Teach them to be realistic. I consider it a hard part of parenting to help a young adult truly understand and value money. One great resource for young people is Money Diaries. It is book that talks about money in ways that college students and those in their first career understand. My favorite feature is the money profiles in which young people describe how much they make and what they spend per month. Being realistic means understanding how much things really cost (Wifi is not free all the time!) and how much they could potentially make at this stage in their lives.
- Encourage budgeting. Even a small budget for a limited amount of time can provide valuable experience in planning. My oldest is moving into an apartment for the summer and will have, for the first time, grocery expenses. In order for her to determine how much a week she needs, I asked her to create a budget. She went online to two different grocers and “bought” what she will need. She was able to comparison shop and get an idea of what items cost before she headed to the grocery store. With this short-term situation, she is learning about estimating cost and living within her means.
- Share the beauty of compound interest. If you are not an math major, you can use an online calculator to show your student how compound interest works. I show my college students how interest compounds on student loan debt so they can see that when they borrow $20,000 in student loans, they will end up paying more than that over time. The same is true for saving and investing. While it is not glamorous, our family talks about the advantage of early savings and how compound interest works in their favor as well. My husband’s favorite phrase these days is “When is the best time to save? The answer is ‘today.'”
There are so many topics I would like to talk to my students and my own kids about other than financial issues, but I have seen how much it helps them to know how to manage their money and make informed decisions. Maybe we can change our students’ views–and behaviors–so they feel more confident and become financially independent sooner.