Parents, it’s also time for us to get college ready
Parents, it’s also time for us to get college ready
Financial Health
April 17, 2015

Parents, it’s also time for us to get college ready

With tuition on the rise, the head of Wells Fargo’s private student loan business outlines ways to get college ready financially and improve your ability to manage expenses.

When I attended the University of Wisconsin Whitewater from 1984 to 1988, tuition and room and board cost about $3,000 a year. Fast forward to today, when the financial tab to get college ready has risen dramatically. One example: According to an economic letter the Federal Reserve Bank published in 2014, the average college graduate who paid $20,000 in tuition each year would need until age 40 to begin to recoup that sum through earnings.

Parents, it’s also time for us to get college ready

Surprisingly, the soaring cost of tuition hasn’t kept college-bound students from applying. In fact, the opposite is true. The percentage of 18- to 24-year-olds enrolled in college rose from 36 percent in 2001 to 42 percent in 2011, according to a report by the National Center for Education Statistics.

With one of my children attending college and another soon to leave the family nest, I want to see them succeed financially — and that means making sure that I get college ready, too.

If a family or college-bound student builds a financial plan early enough, managing college expenses can be more, well, manageable.

As a parent, I believe it is important that my child fully understand three important fundamentals: paying for college, managing expenses, and managing money/building credit.

Paying for College: Parents may not realize that many colleges offer a calculator to determine total costs, including housing, books, and meal plans. The  total cost might be more than what was expected or planned. When that happens, a parent or family can discuss with their child how best to offset some of those costs – like scholarships, other forms of financial aid, or working part time on campus.

Managing Expenses: Your child might be diligent about turning in homework assignments on time and scoring well on tests, but for many, college may be the first time your children will have to actively manage their own money and pay bills. For that reason, it’s important to spend time with them to help build positive financial habits. Some suggestions to help your child keep their college career on the right path:

  • Help them set up a student or college checking account: Once the account is open, provide guidance on how to monitor the account and share best practices for identifying fraudulent activity.
  • Create a budget: A budget can help students manage spending to save for short-term needs – like books for the upcoming semester – and future goals, such as a spring break vacation with friends. The key to budgeting is being honest with your children about how they’re spending and the true value of their purchases.

Managing Money and Building Credit: As a parent, we’ve learned – sometimes the hard way – that good money management makes sense. It’s helpful to think back to what you didn’t know then that you know now and educate your children how improper money management can negatively impact their credit, which is important because it impacts so many areas of life. For example, having a good credit score can help your son or daughter qualify for a better interest rate for credit products, or save on common necessities like car insurance premiums, cell phone contracts, and apartment rentals when they graduate. A few items worth discussing with your child:

  • Establish credit: Your child’s credit history will exist in one report that tells lenders about his financial history — why it’s a best practice to reinforce the importance of paying bills on time, every time.
  • Manage college debt: Borrow only what is needed. Most experts recommend keeping total loan payments to no more than 10-15 percent of anticipated post-college income. And, look into discounts like enrolling in automatic payments or banking relationship discounts.
  • Plan for the future: Once a graduate has an income, experts recommend putting aside 20 percent of annual salary. To grow savings, encourage your child to set a goal, and then build a plan around it. If she landed her first job, remind her to find out if her employer offers a 401(k) plan that they can contribute to regularly. Even a small contribution towards retirement at the beginning of one’s career can make a big difference later in life.

Luckily there are many free online resources to help us as parents and help our children prepare for college, including Wells Fargo’s interactive website Get College Ready℠. The site brings together the information a family might need to help its college-bound student learn financial basics and become more fiscally responsible. It offers quizzes, calculators, videos, checklists, educational articles, and more.

Regardless of which resource you use, take the time and start getting college ready today.

Parents, it’s also time for us to get college ready