Junior has been offered a spot in a post-secondary program and is eager (or maybe not) to get on with this next big life change. This step involves much more independence in a student’s decision-making, including decisions to be made around academics, health, accommodations, transportation, and other lifestyle choices. Most of these decisions will involve spending money. Is your child ready for this financial responsibility?
Financial knowledge must be taught, either through day-to-day interaction, modeling and discussion of a family’s financial habits, or through a prepared financial literacy program. Some parents may feel unqualified to teach their children about money management, but imparting what we do know – and looking for help on the things we don’t know – will set a future post-secondary student up with the basics of financial awareness.
Budgets
The foundation of most money talks with upcoming post-secondary students is budgeting. How much will it cost to spend a month or a semester or an academic year in post-secondary? What costs will need to be covered, such as tuition, books and equipment, housing, transportation, food, and any discretionary spending? How much money will the student have available from savings, parental contributions, student loans, and any scholarships earned? Seeing the numbers on paper will make it clear to your child whether financial stress is likely or not, and, if it is, will allow them time to make plans to mitigate it.
The importance of saving enough money to see them through the year cannot be overstated by parents. There are many peer and social media pressures that can mess with young adults’ resolve to save and tempt them to spend more. Encouraging students to keep close track of their spending habits is the only way to ensure commitment to that budget.
Spending wisely
Money management does require spending as well as saving. Post-secondary students are often in a financial position to spend only on items that they really need, with little extra cash for things that they simply want to have. Ramen noodles and instant coffee are staples for many students! The cheapest items will often do, but sometimes more thought should be put into our purchases, since cheap items are often poorly made or less healthy, and provide significantly less value for money.
Parents can talk about and model good decision-making when purchasing groceries, clothing, technology, personal items, etc. Aside from simply considering price, we can read labels, consider how long the product can be expected to last, wonder about how far items have travelled or who made them, or think about whether they’re actually good for us. Modeling in this way, we show that there is value in spending our money on things that will truly provide good health and satisfaction, such as nutritious whole food items, extracurricular sports clubs, or higher quality clothing.
Good and bad debt
Your child needs to understand that a post-secondary education is a big investment in their future success and earning power, and, as such, any debt it creates can be considered “good” debt. Even good debt is better when it’s smaller though, so saving as much as possible before entering post-secondary and perhaps taking on a job for few hours a week while in post-secondary will be helpful, if necessary.
It is also important to discuss the pitfalls of “bad” debt, and how to avoid them. For example, it is common for students get their first credit card when they start post-secondary, and, when they get their first bill, they are often shocked by how quickly their purchases added up. They also don’t necessarily understand how essential it is to completely pay off their credit card bills by the due date each month to avoid racking up exorbitant interest charges and fees.
Financial literacy courses
Many post-secondary institutions offer money management workshops through their student union or student services offices, and some even have financial literacy courses available as elective credits. As young adults are often keen to learn about money and how to get more of it, encouraging your child to seek out further information can end up benefitting the whole family.
The post-secondary experience is often the beginning of a young adult’s financial responsibility. Students who have had a part-time job in high school may already have a pretty good awareness of the value of the money they earn, and hopefully will have saved some of those earnings for their upcoming post-secondary expenses. The more that students themselves are able to invest financially in their own future, and the more knowledge they have gained about money matters, the more likely they will be to make thoughtful and appropriate choices during their post-secondary education and beyond. Any financial information that parents can provide beforehand will certainly help make the transition easier.
For more information about paying for post-secondary education as well as other topics on entering post-secondary, check out Ready to Launch: Navigating the Transition from High School to Post-Secondary Life — A Guide for Ontario Students and Parents.