Talking to Kids about Heading Off to University/College Part 2 (of 4)

2. Do they understand the implication of signing a contract? Everything comes with fine print. From cell phone plans to credit card applications, everything has rules.  In a world where no one reads the fine print – hey do you think your kid really reads the rules before they click “I accept” on all those web applications? – it’s easy to enter into a contract without really understanding the implications. I can’t tell you the number of letters I get every week from people who want to know how to get out of their car loan or lease because they’re finding the payments too much to manage. More than a few parents have been shocked to discover they have to cover outrageous cell phone costs and myriad other things their kids signed up for, totally clueless as to how they would actually follow through on their commitment. Which brings me to…

3. Do you HAVE to bail them out? Sometimes you do. After all, they’re learning and some mistakes are too big. But kids need to learn from their mistakes. If you are always rescuing them whenever they get into a bind, they’ll never have to take responsibility for their own decisions. Going a couple of days on soup and crackers will help them see that spending all your money drinking on the weekend, or buying that new pair of shoes has it’s ramifications. Heaps of kids have been taught that their mistakes and mommy’s and daddy’s to fix because, well, mommy and daddy can’t stand to watch Lil Suzie suffer.  Hmmm.  You need to let your kids make their own mistakes and come up with their own solutions if you want them to learn that they can. No matter how painful it may be for them and for you, let ‘em sweat some.

4. Has your kid got impulse control issues? I’ve met many an adult that can’t keep the impulse monkey off their back. Kids are particularly susceptible, especially if you’ve given into their every whim while they lived at home.  But at some point they have to learn to keep their impulses under control when it comes to their money. Have you taught your young’un to stop and think before spending money. Have you discussed things like emergency funds, and how useful they can be for hauling your butt out of the fire when things go very, very wrong? Have you shared your own mistakes and how you learned about being prepared for the worst?

5. Is your child going to apply for and use a credit card at school? Credit cards get students in more financial trouble than anything else. Credit card companies target students in certain programs because they know their income potential and they want to grab ‘em by the short-and-curlies early on.  It’s a travesty. After all, when else can a person without an income qualify for credit?

Make sure you explain how credit cards work, the implications of taking cash advances (they shouldn’t because of the immediate interest hit), and how to track their spending on their card so they don’t end up with a bill bigger than they can afford to repay. Stress how what they choose to do now can affect them in the future. If you plan to co-sign a card ensure the limit is very low limit until you are sure your child has the good sense to deal with the responsibility of a credit card.

Next -- Part 3: the cost of student loans and banking
Part 1: cash flow managements

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