- The Biggest Mistake Parents Make When Paying for College, According to a Financial Planning Expert
- Mistake #1: Jeopardizing Your Own Financial Future
- Mistake #2: Equating Price or Brand Name with Quality
- Mistake #3: Waiting Too Long to Plan
- 10 ways students can build good credit
- 10 ways college students can boost good credit
- 1. Become an authorized user on a parent’s account.
- 2. Open up your own credit card
- 3. Get the right credit card for you
- 4. Use the credit card for occasional, small purchases
- 5. Avoid big-ticket buys, except in case of emergency
- 6. Pay off your balance each month
- 7. Pay all your other bills on time
- 8. Don’t co-sign for your friends
- 9. Do not apply for several credit cards at one time
- 10. Use student loans for education expenses only, and pay on time
- Boundaries With Kids | Raising Teenagers
- How to Draw Clear Boundaries
- 1. Recognize and Acknowledge
- 2. Observe
- 3. Don’t Take Control—Take Charge
- 4. Hang in There
- 5. Enjoy Your Connection
The Biggest Mistake Parents Make When Paying for College, According to a Financial Planning Expert
Everyone screws up when it comes to money.
It doesn’t make you stupid—just normal, says Jill Schlesinger, a financial planner, CBS News analyst and author of the new book The Dumb Things Smart People Do with Their Money.
One of those dumb things is over-borrowing for college, something Schlesinger says is an increasingly dangerous pitfall for middle and upper-middle class families for a variety of reasons.
Parents want to do everything they can to give their kids the best opportunities in life, and some may feel they haven’t done a good job if they can’t give their student the college experience they want, she says.
Meanwhile, college costs have climbed faster than family income, while most new jobs demand some level of postsecondary training.
“When you bring all those factors into one stirred pot, you get a very explosive and emotional situation,” she says.
Schlesinger has been giving financial advice for nearly 30 years, and she’s layered those personal experiences with data on tuition, student debt, and the job market to help you learn from the financial mistakes others have made when it comes to sending their kids to college.
Money talked with Schlesinger about her chapter on paying for college and condensed her best advice into the tips below. She says it’s imperative that parents are honest with themselves about what they can afford, protect their kids from borrowing too much—and avoid these three major errors.
Mistake #1: Jeopardizing Your Own Financial Future
When you’re tempted to overextend yourself to send your student to their pricey dream school, keep in mind that you’re not doing them any favors by putting the family on rocky financial footing.
Too many parents count on playing catch up with retirement contributions after they pay for college, Schlesinger says. Some even plan to delay their retirement by several years, only to find themselves with no plan B when their salary is cut or they’re laid off.
It’s mind-blowing, Schlesinger says, that the fastest growing segment of the population with student loans is people who are in their 60s and older.
“I know you want to do right by your kids, but remember: If you screw up your own retirement, the burden is going to fall on them,” she says.
Mistake #2: Equating Price or Brand Name with Quality
Some of the more extreme voices in personal finance push students to avoid debt at any cost—relying on scary, outlier stories of graduates with six-figure debt burdens who can’t find jobs.
Schlesinger doesn’t. She highlights research, both in her book and in an interview, that shows college pays off for most graduates, even if they have to borrow to afford it.
Men with a bachelor’s degree claim nearly $900,000 more in median lifetime earnings than high school graduates, and women with bachelor’s degrees earn about $630,000 more, says Schlesinger, citing data from the Social Security Administration.
Still, Schlesinger is adamant you shouldn’t borrow more simply to attend an expensive college or a college with a recognizable name. Instead, you’ve got to weigh the costs and benefits of a college with your family’s financial situation and your student’s career goals, she says.
That’s because a college’s wage premium depends most on what you study and what career fields you ultimately go into. The size of the payoff, in some cases, also depends on your family’s economic situation, Schlesinger says.
Money’s college data show, for example, that students who studied business at Texas A&M University-College Station and the University of Texas at Austin report salaries that are on par with graduates of Baylor and Southern Methodist universities—even though the latter two are well-known private universities where Money estimates a degree will cost on average $50,000 more. In New Jersey, the public Ramapo College of New Jersey—less well known than the flagship Rutgers University or prestigious College of New Jersey—has a better graduation rate and a lower average student debt load than nearly 50 private colleges in the surrounding states with more expensive average prices, according to Money’s rankings.
Schlesinger is concerned about the middle- and upper-middle class families who are generally outside the cutoffs for need-based financial aid, but aren’t wealthy enough to bear the full price of college.
Too many of those parents, she says, aren’t analyzing costs and returns.
Instead they’re scrimping to send their students to more expensive private colleges, just based off the assumption they’re better than an in-state public college.
“You really do need to start seeing the college decision for what it is: a hard-edged business decision, one of the biggest and most important that you and your family will ever make,” Schlesinger writes.
Mistake #3: Waiting Too Long to Plan
Plan for college you would plan a vacation. That doesn’t mean you should endorse a school its proximity to the beach. But you should figure out what you can afford well before you choose a destination, just you would when planning a family trip.
Once you’ve got an idea of what you can afford, you have to communicate that to your children. Do not, Schlesinger stresses, wait until the spring of your student’s senior year of high school as they’re reviewing acceptance and financial aid letters. Instead, tell your kids during their freshman year of high school how much you plan to contribute to their college expenses.
It may feel awkward to talk about financial constraints, but just be honest, she says.
“You say, ‘This is what we feel comfortable doing, and as a result, this is the kind of school we think is going to be most appropriate,’” she says.
If your student wants to go to a more expensive school, then you can work together to research the options for scholarships or other strategies to make it affordable.
But you shouldn’t simply allow your child to borrow excessive private loans to attend a more expensive school.
And you absolutely shouldn’t feel you need to borrow or dip into your savings to bridge the gap between what you can afford and the price of where your child wants to attend.
“I’m really worried that we have a whole cohort of parents who, with the best intentions, are putting themselves in an insecure position when it comes to retirement,” she says.
10 ways students can build good credit
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One of the most exciting parts of growing up is becoming financially independent, but learning how to do so can be challenging. Building good credit is a must: It will help you qualify for loans, auto insurance, rental applications, cell phone plans and can even impact job prospects.
10 ways college students can boost good credit
How do you get started? The Credit CARD Act, most of which took effect in 2010, changed the rules of the game by banning credit card issuers from approving anyone under 21, without a co-signer or proof of independent income.
Basically, if you can’t prove to the issuer that you have the means to pay your balances, you probably won’t get a card. But with or without a credit card, it still all comes down to being responsible.
We asked several financial experts to explain how you can effectively build good credit. Here’s what they recommend:
See related: Sending kids off to college with a rewards credit card
1. Become an authorized user on a parent’s account.
“I always advise parents when the student is going off to college, unless you’re 100 percent sure they’re responsible, the first credit card that student should have is yours,” says Mike Sullivan, former director of education for Take Charge America, a Phoenix-based nonprofit financial education and consumer debt service organization.[nlewstetter]Becoming an authorized user on a parent’s account can help build good credit by “piggybacking,” a controversial practice that FICO – creator of the widely used credit score bearing its name – continues to permit among family members.
Using piggybacking, if your parent has good credit, your credit will get a boost, with fewer risks associated with having your own credit card, since the primary account holder will be able to monitor spending.
Becoming an authorized user has long been a popular choice for students aiming to build good credit. But in the wake of the Credit CARD Act, it may now be the only choice for some.
2. Open up your own credit card
If you can provide proof of income, it may be time to apply for a card in your name. But know that things have changed from the days when every college freshman’s dorm mailbox overflowed with credit card offers and card issuers rained free pizza and T-shirts on students who applied.
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In this post-Credit CARD Act era, most issuers are no longer clamoring to put a credit card in the hands of every college student. Some no longer offer student cards; others switched to pushing debit cards on campus.
Also know that when you receive a credit card that’s all yours – one with no co-signers – the responsibility for handling the card wisely and repaying your debts falls squarely on your shoulders.
3. Get the right credit card for you
Once you’re able to qualify for a regular card on your own, it’s important to remember that not all credit cards are the same, says Clarky Davis, former spokeswoman for CareOne Credit Counseling, a debt relief service provider based in Columbia, Md. and formally known as the “Debt Diva.”
Before you apply for a credit card, you “must do some research to find a card with the most benefits – a lower interest rate, no annual fees, reasonable credit limits and clear billing policies,” says Davis.
If you think you might carry a balance, go with a no-frills, low interest credit card. A reward credit card may sound cooler, but the higher annual percentage rate (APR) and possible annual fee won’t be worth it.
Sullivan says some students should consider starting out with a retail card. Retail cards come with fewer benefits and lower spending limits, but using this card and paying the bill regularly will build good credit.
Davis says those who can’t qualify for a retail card will need a secured credit card, which is attached to a savings account. However, if you pay the bill responsibly and on time, you’ll eventually qualify for a regular credit card.
That includes student credit cards, products that are directly aimed at consumers who may lack significant borrowing history.
Retail cards come with fewer benefits and lower spending limits, but using this card and paying the bill regularly will build good credit.
4. Use the credit card for occasional, small purchases
Since responsible card use and on-time repayments will help you build a good credit history, while also discouraging the bank from closing your account due to inactivity, don’t just leave that plastic sitting in your wallet.
“Getting a credit card means you start a credit history and shows on your credit report that you have one account and no late payments,” Sullivan says. “But if you really want to start credit, you have to use the card.”
One way to do that? Consider putting small, recurring charges on your card: Think of regular expenses, such as groceries or monthly subscriptions ( Netflix), that you won’t have trouble repaying at the end of the month.
See related:Multiple monthly card payments can boost credit scores
5. Avoid big-ticket buys, except in case of emergency
“A credit card is a valuable financial tool. However, students must be able to manage their credit card responsibly to benefit from using the tool,” Davis says.
Keeping your debt levels low will ensure that if there is an emergency, you’ll still have plenty of your credit line accessible.
So, if your tire blows out or your cell phone falls in the toilet, you can purchase a replacement without exceeding your credit limit.
A credit card is a valuable financial tool.
However, students must be able to manage their credit card responsibly to benefit from using the tool.
6. Pay off your balance each month
When you are first building good credit, do your best not to carry a balance on the card. Use the card only for purchases you can afford, and pay off the balance at the end of each month. What if you can’t? You are living beyond your means and shouldn’t be making those purchases.
“A student should only have a credit card if he or she has a job or some sort of income to support this financial tool,” Davis says. If you carry a balance, you will owe interest fees.
Why pay a fee if you don’t have to?
See related: Student credit cards: The definitive guide
7. Pay all your other bills on time
Think only your credit card affects your credit? That’s how it used to be, says Sullivan, but “right now, there are a lot of folks, including credit bureaus, who are developing alternative credit scores for no-file people, which includes lots of young people. They’re giving some credibility to utility payments.”
In 2018, one of the three major U.S. credit bureaus, Experian, launched Experian Boost. If you grant Experian permission to your bank account, this platform will report mobile phone and utility payments – which could give you more control over your credit score.
All three major credit bureaus also collect and list rental payments on credit reports. But this is dependent upon landlords reporting this information, and not all do.
Sullivan says other dues, such as taxes and library fees, can make a difference, too. He has seen students whose credit has been ruined because they failed to pay a traffic fine. Davis agrees: “Paying all your bills – from apartment rent to your Internet service – consistently and on time is essential.”
8. Don’t co-sign for your friends
Just you may need an adult co-signer to get approved for a card, your under-21 friends will, too. To help them get approved for a card, some of these friends may approach you to become a joint account holder. “I have found that some students are getting older students (fraternity brothers, etc.) to co-sign. That is quite dangerous,” Sullivan says in an email.
Consumer experts have a tip for you: Don’t. That’s because when a friend slips up – by taking on too much debt or missing payments to the bank – the co-signer can quickly see their own credit ruined.
“You not only become liable for everything charged if your friend decides not to pay, but it could blemish your own credit record,” says Edgar Dworsky, founder of the website ConsumerWorld.org.
Making your friend an authorized user also poses risks. Once again, their mistakes can hurt your credit, although – un when you co-sign on a card – an authorized user can be easily removed from the account.
9. Do not apply for several credit cards at one time
Now that you have credit in your own name, don’t go wild. If you apply for too much credit in too short a period of time, your credit score will fall. If you have built up strong credit over several years, it will hurt you less.
“But if you have barely established credit and apply for multiple cards, it can lower your credit score significantly,” Sullivan says.
One credit card should be enough for most college students, he says. How many cards should you have? “To prevent excessive credit card debt, it’s better for consumers to have as few credit cards as possible.
Having just one card is ideal for most students,” Davis says.
Now that you have credit in your own name, don’t go wild.
If you apply for too much credit in too short a period of time, your credit score will fall.
10. Use student loans for education expenses only, and pay on time
“Students should view their student loan as a great way to cultivate important habits that will help them build and maintain good credit,” Davis says. If you use them correctly, that is.
Sullivan says he sees a lot of young people take out student loans to buy cars and other noneducation items. “Manage your loans by only borrowing what you need to go to school — that keeps the balance down,” Sullivan says. “When you get school, be prepared to consolidate when appropriate.”
Davis and Sullivan agree that the real key to keeping your loans healthy is to make at least the minimum payment every month and do it on time. Davis recommends paying more than the minimum to pay the loan off faster, and emphasizes that payments should be received by the creditor on or before the due date on the statement to keep the account in good standing.
The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.
Boundaries With Kids | Raising Teenagers
As a family therapist, over the years many parents have come to me and said, “My child has so much going for him, but he’s just throwing his life away. Why is he doing drugs? Why is he dropping school? Why is he making terrible choices with his life when he has so much potential?”
I’ll never forget the mother who said in exasperation one day, “Sometimes I just want to superglue my daughter to the chair until she gets her teen years!”
The good news is that you have the power to influence your child’s decisions by taking control of yourself—and not your teen.
One of the most painful and frustrating things for parents is watching their teens make bad choices and “throw it all away.” Some of these choices include running with the wrong crowd, blowing off homework, dropping school, drinking and doing drugs, and engaging in risky behavior.
What can you do if your adolescent is making bad choices? I know many parents who have lost sleep at night, wondering what their responsibilities were.
They ask themselves, “Is it my responsibility to fix things? And if it is, exactly what am I supposed to do with a teen who refuses help?” When the pain of watching your child toss opportunities out the window becomes overwhelming, it’s natural to try harder to control them or throw your hands up in despair.
The difficult truth is, you don’t have control over your child’s choices—or the outcome of his or her life. You have a chance to guide him to a better place—that’s what you’re responsible for.
The good news is that you have the power to influence your child’s decisions by taking control of yourself—and not your teen.
As James Lehman says, “You can lead a horse to water, and while you can’t make him drink, you can make him mighty thirsty.”
How to Draw Clear Boundaries
The idea of drawing clear boundaries can be confusing. I think it’s really about saying, “I’m on your side, I’m on your team, we love you and we care about you.
We don’t the choices you’re making and this is how we are going to stop enabling you.
” If you have very strong, clear boundaries that you maintain around what you will and won’t do for your child, that’s different than constantly trying to figure out how to control or change him.
In your relationship, you’ll want to draw those lines and maintain them. You can say, “You can’t live here without following these rules. I’m not handing you money if I suspect you’re doing drugs.
” Or “I’m not driving you to that party.” You’re clearly stating what you will do and what you won’t do.
It’s the difference between taking charge of yourself versus trying to control your child’s actions.
Remind your child that this is not about punishment or disobedience—it’s about his welfare. You might say, “We love and care about you, that’s why we’re doing this. This is not punishment for breaking a rule. We’re going to do whatever it takes to keep you safe.”
The best part is that you really are controlling what you can control. That’s always the way influence works. “I’m not telling you what to do and I’m not going to scream and yell. I’m simply going to do what I think is best.
I’m not going to enable you by giving you rides and money. Those liberties are taken away until you can be responsible for yourself.” So you just close those doors.
There is a huge difference between taking your child by the collar and locking him in a room versus taking charge by giving him the appropriate consequences.
Here are five steps to help influence your child to make better life choices.
1. Recognize and Acknowledge
First, recognize and acknowledge your own feelings of panic, despair, powerlessness, frustration, and disappointment. All you have to do at this stage is simply acknowledge these emotions. Don’t react by judging yourself or your child.
Blaming, yelling, hovering, distancing and becoming very controlling—or whatever ways you typically manage your anxiety—will only cause you to have more pain to manage and will be damaging to your relationship with your teen. It will also make your child wrestle with you instead of wrestling with the choices he needs to make.
Don’t hand him the opportunity to avoid responsibility for those key decisions. You don’t want him fighting for his autonomy by doing the exact opposite of what you’d him to do. Instead, acknowledge your own fears and feelings, and handle them without asking your child to handle them for you.
Take walks, listen to music, do yoga, talk to your family or friends, get more involved in your own career—do whatever it takes to avoid over-focusing on your child. Stay in your box—don’t let your anxiety cause you to jump into your child’s box.
Observe, think and change your contribution to any negative patterns in your relationship.
When you’re calmer, you will be able to think more effectively about the best way to guide and lead—and not control—your adolescent.
Guiding and leading requires you to change your behaviors as a parent instead of trying to get your adolescent to change his. Step way back and see if you can observe what might be going on. Ask yourself these questions:
- When did these poor behaviors begin?
- Were there any triggers?
- Are there any ways you or your spouse contribute to the problem?
- Have you felt overly responsible for the choices your child makes?
- Do you believe that it’s your job to get your kids to make all the right choices?
- If so, have you been over-functioning for your child by babying her and contributing to her irresponsible ways?
- Have you provided too many rules or too few?
- Has your spouse been too hard on your child, while you’ve been too soft? Perhaps both of you have been making lots of noise, but no one has really taken charge.
- Is your child functioning in reaction to you, for some reason, instead of functioning for him or herself?
It might be time to stop your part of this two-step dance. When you carefully observe your own patterns and tendencies, you can decide if there are any steps in your dance that can change.
3. Don’t Take Control—Take Charge
Take charge rather than take control. Again, you do not have control over all of your children’s choices, but you can help influence their decisions. If your teen insists on going out and returning at three in the morning, you cannot lock her in her room every night just because you’d to.
You can’t control her without hurting your relationship. But you can tell her this: “If you return after your curfew, there will be a consequence. You won’t be able to use the car or go out with your friends again this weekend.
” In other words, she can make a poor choice, but you will respond to her poor choice by making her feel the painful consequences of that choice. Don’t make it easy for her to continue bad behavior. If she breaks rules, confront her and let her know the rules remain in place.
Maintain strong, clear boundaries in a loving and connective and matter of fact way. Be the adult she needs.
I want to make it clear that if your child is doing something unsafe, destructive, abusive or risky, cutting herself, bullying others, or doing drugs, she has crossed a line. You need to respond immediately with very strong interventions. Because you care for your child and love her, you will not sit passively by.
If you have evidence that she is doing drugs, for example, you need to do whatever it takes to intervene. If it requires calling other parents, calling the school or authorities or a crisis team, or getting her into counseling and rehab, you will do that.
If what is happening is serious enough, then you may have to risk hurting your relationship with your child in order to keep her safe.
4. Hang in There
I’m not going to sugarcoat it: Some kids will have a difficult journey. But no matter what, you should try to hang in there the best you can. You can keep your rules in place even though your teen is constantly breaking them. Always remind him that the rules are for his welfare.
He may eventually mature, but there is a chance he will throw a lot away. What ultimately counts is not whether you are able to perfectly control your teenager, but whether you can hang in there through the tough times and come back for more the next day.
Accept the reality that there is a good chance that your child may throw many opportunities away despite all your good influence. Ultimately, you will need to grieve the losses and the disappointments of your own hopes and dreams. But hang in with your child and continue to move forward together.
To quote James Lehman again, “Parent the child you have—not the child you wish you had.”
5. Enjoy Your Connection
Enjoy those good moments with your child. Be the adult, maintain your boundaries, be firm and clear about your bottom line and then enjoy your teen.
Focus on what is positive between you and don’t define your relationship around the problem. Share your interests, discuss politics or topics outside of your relationship and really get to know your teen.
See them through lenses that are not clouded with distrust and negativity. See them for all they are—not just their bad choices.
So first, recognize your emotions so that you don’t react by judging yourself or judging your child. Then step back and try to understand what might be going on—and if there’s any part you might play that you can change.
And then, take charge instead of trying to control: start closing the fence. Once you put all of that in place, remember that there’s a whole other part of your child’s personality that you can relate to and enjoy. Make sure to do that.
And if all fails—because it can—acknowledge and grieve your disappointments about the lost opportunities for your child. Understand that some kids remain control no matter what. It might take maturity for them to make the necessary changes.
Don’t give up on your child: he needs you to be a strong presence in his life even if he’s making bad choices right now.