The desire of kids to attend their ‘dream school’ is a dangerous one if it forces you to borrow your way through life. Your children should learn about the financial aid process in while still in elementary school; learning the details while in high school.
Student loans are one of the issues that inspired this post for me. Student loans can be a misunderstood financial tool. High school kids and parents may not fully understand the lending terms of these loans but tell their kids ‘its an investment in your future.’ The colleges love to hear that! The desire of kids to attend their ‘dream school’ is a dangerous one if it forces you to borrow your way through life. Your children should learn about the financial aid process in while still in elementary school; learning the details while in high school. We can suggest some of the many avenues which offer free money to college students through grants and scholarship.
Money spent on credit cards is real and students often don’t understand that or just don’t care. If going away to college is a student’s first opportunity to act responsibly with credit or pay the consequences, credit cards can teach you an unfortunate lesson. I’ve seen it in my practice with young clients who relied on credit cards to maintain their lifestyle during their last few years in school. Graduating into an economy like this is tough enough; doing it while racking up fees and penalties on a credit card is just not necessary. Credit cards should be used with kids starting at 14 or 15 and they should understand the positive affects of building strong credit at a young age.
The issue of financial literacy affects younger children as well. Most of us have been discussing the financial crisis and the recession with our families and co-workers over the past few months. We leave children out of it because we generally consider it to be ‘over their heads’ or inappropriate to discuss money issues with 4th and 5th graders. That may be true in some cases, but I think keeping a child’s understanding of money to a simple allowance really isn’t going far enough. Just like filling out a scorecard at a baseball game can be a hobby for kids, so can tracking stocks and market indexes—even without the usage of real money. The hypothetical scenarios we deal with in business school about how executives come to make important business decisions can apply to children as well. We just need to create analogies which kids can understand, perhaps using playtime, lunch money, and toys as examples.
Make sure you consider 529 Plans to help your children get a better start with their post college life.
If you would like to meet with a Peak Financial Partners adviser to develop a financial plan for your family, please call us at 1-614-542-7242; or send an email toinfo@peakfinancialpartners.com.