What Parents Can Do


Credit Course for Students

The University's Family Social Science department offers an online, one-credit course on finance for first-year students.

The goal of Cash or Credit: You Need to Know (FSoS 1301is to help students decide whether or not they want to apply for a credit card or to keep the card they may already have. The information students learn in this class will help them make responsible choices and use credit responsibly.

Parents may want to encourage their student to take the class, which consists of 16 lessons that discuss such topics as how to make and follow a budget, how to protect against identity theft, and assessing which credit card, if any, is right for the student. Lessons are presented through PowerPoint presentation, readings and audio clips, including audio clips from industry experts giving some valuable tips on credit.

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Ongoing Communication

Few teenagers have a realistic concept of living expenses until they pay the bills themselves. They understand best the expenses that they, themselves, have directly affected in the past: The phone bill, in their experience, is all about the calling minutes and ring tone downloads they charged; they may not have been responsible for the monthly phone plan. They know the exact price of a burger and fries, but the grocery bill is a foreign concept.

Students need to know the overall cost of their college education, but such a big sum, stretching over four years, might seem incomprehensible at first. If you break down the total into monthly and annual expenses, your student can see more clearly the financial impact of the decisions she is making.

You can help your child develop financial skills, but it takes time, patience, and perseverance to work through the steps. 

Encourage—and teach—your child to keep financial records. You will need the records for tax purposes, and there will be times when your student will need proof of a payment or a receipt for some item. A week after classes begin, if he decides his advanced calculus class is too difficult and he wants to switch to an introductory math class, he will be able to return his calculus textbook only if he can find the receipt. Make sure your child knows that he must keep bank statements, tuition statements, receipts and warranties for all major purchases, credit card agreements, scholarship records, and loan agreements.

Organize a file for financial records—During the first year of school, a single folder for finances in the college file box might be sufficient. Freshmen can file all major financial receipts and records together. As a general rule of thumb, if a folder becomes too bulky to easily manage, it should be arranged into two or more folders. When students move to an apartment, or if you agree that more organization is needed, a separate file box just for financial records will be helpful. Let your student decide if it makes more sense to organize records by month—putting all receipts and statements for a month into one envelope or folder—or by category, such as academic expenses, room and board, communications, transportation, etc. Encourage him or her to get into the habit of filing receipts and statements faithfully.

Be sure your student knows what records are required for tax purposes and for student loan or scholarship applications. Even if you are paying most of the bills, your student will probably receive the statements and receipts. Discuss how you will communicate about those documents. If you need them for tax purposes, how and when will you get them?

(Edited from You’re on Your Own (But I’m Here If You Need Me), by Marjorie Savage, Simon & Schuster 2009)

Read about other ideas from University of Minnesota parents on talking about finances.

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Budget Planning

Students take finances more seriously when they know their parents are concerned about expenses. Setting up a budget in collaboration with your student will help them understand the true cost of college, and tracking expenses helps them see how quickly money disappears.

To work through a simple University of Minnesota budget complete this budget activity.

Try this online tool for estimating a student budget.

To work through a detailed savable Excel spreadsheet budget complete this budget worksheet (XLS).

What kind of spender are you? Work through this online quiz with your students.

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Student Advice for Parents

Students in the Cash or Credit: You Need to Know class were asked: What was the best advice your parents gave you related to finance?":

"Don't overextend yourself, but at the same time, don't take out too many loans and burden your future."
"Well, I would have to say that the best advice my parents gave me was to not spend all of my money on partying, and to keep a good record of all of my expenses."
"They said, 'Use your money wisely!' They didn't want me to take up any sort of loans. However, I guess since I still live at home, they didn't mention credit to me at all. My parents told me only to use money for gas and nothing else, because there is nothing else that a college student would need to spend on."
"They never really did give me advice. They really urged me to apply for scholarships my senior year, but by the time I went to college, I had worked and saved to pay for my tuition and books. My parents had set up a mutual fund for me when I was younger, but I decided not to use the money in that fund unless I really needed it."
"Don't get a credit card. Save up for a rainy day. Balance your check book. Shop sale racks. Never pay full price. Buy used cars. Keep your car in good condition so it will maintain its value and quality."

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What Parents Didn't Say

When asked what advice students wish their parents had given them, they said:

"I wished they would've told me that it's okay to have needs and wants, because school is like a full-time job and when you are at school, you still need to eat and buy clothes to wear just like every other person. My (parents) nag at me for spending my money elsewhere other than gas, but I need other things, and my spending cannot go towards just gas only. I wished they could've just told me not to worry about credit at all, but I guess because I didn't work, and I didn't have spending money during the holidays, I applied for a credit card."
"I don't think there is anything I would have wanted my parents to tell me. I observed them growing up, watched them pay their bills, I helped my mom balance her checkbook. They seemed concerned about money but never to the point where we didn't get the things we needed or even wanted. I guess I wish my parents would have talked to me about investing more often, however, I think I now know more than they do -- so maybe we didn't talk about it because they didn't know much about finances either."
"That interest rates can be negotiable. Save any extra money you make. Try not to spend your extra money on things that will wear out and lose their value. Pay all the little stuff, too. Even small bills and fees (like Netflix and the local dentist) can follow you and end up on your credit report."
"That I need to start saving. They did not put a huge emphasis on it because they have never been able to save money. Every cent was put to the necessities. They never had much, and so they lived. It worked for them, but it would have been nice to start saving earlier."

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Student Advice for Students

The Cash or Credit students were also asked what advice they have for incoming students:

Student: "Just manage wisely, no need to become a big saver. I had tons of friends who live paycheck by paycheck, and they have fun in the short run. I spend some portion of my paycheck, but save some if it for those unexpected emergencies. Trust me, in college you'll have a lot of those. Also don't depend on your parents so much. I went through college without my parents' help, and I feel it's all part of growing up."
Student: "Don't spend it just because you have it. Money comes and goes, and it usually goes fastest when it doesn't need to. Save your money for times when you'll either really need it or for when you're in a position to start thinking about the future. Working until age 67 and then dying (average male) at 74 or so just doesn't seem like fun for me. Start thinking about retirement because otherwise it WILL bite you in the butt when you're older."
Student: "I would say, don't bother with credit unless you really need it for emergencies and unless you are educated enough to understand the cost of credit."
"I think it's important to tell entering college students to apply for grants and scholarships, or work, work and save -- take advantage of good grades, talents, or group affiliations and get people to financially support you. A tuition bill of $12,000 a year doesn't sound that high when you're comparing schools, but when you get your tuition bill, you realize just how much money that can be. So it's important to have a plan before getting stunned with the bill and falling back on financial aid. I'm a senior now, and I know some of my classmates that have pulling out $6,000 to $7,000 a year, and now they have $28,000 in debt. If you thought that $12,000 tuition bill was high, just imagine paying off $28,000 with interest."
"Taking out loans to pay for miscellaneous expenses, like supplies or rent, is NOT a wise decision."
Student: "STAY AWAY from credit cards as long as you can. Only buy what you can afford at the moment. It's a good habit to start young and will save you LOTS in the future."
Student: "Don't be misled with instant store discount when you apply for their store credit card. In the long run, it would cost much more by affecting your credit score, and by interfering with one's budget or finance."

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Financial Trade-Offs

Sometimes decisions must be made about whether to trade one opportunity in order to take advantage of another. These decisions often have financial implications. A study abroad opportunity, for example, will provide the student with resume-building experience, but it might mean not working for a semester. Without that student-job income, is the international study feasible? Is it worth the loss in income?

Similarly, unpaid internships can offer excellent training and may even lead to job recommendations, a paid internship, or even a job offer. At the same time, though, the student may be giving up a paid job and incurring transportation and clothing expenses to take the unpaid position.

Students frequently tend to make the "safe choice," keeping a current job rather than going for the promise of benefits in the future. Parents can help their student by assessing the option with the student and giving permission, if appropriate, to forego short-term benefits for long-term opportunities.

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