As another school year approaches, I recall a frantic email I received from an existing client. He asked me for help in rewriting a letter to challenge a university’s Expected Family Contribution (EFC) for the coming school year.
An EFC is the check the parents must write to the school, and it is calculated based on the parents’ income and net worth. Of course, the more income and the higher the net worth, the more you are expected to contribute. (You can learn more than you want about EFCs here.)
Just before I received this email, my client had been laid off and his income dropped considerably. He had to survive by taking premature distributions from his IRA. These distributions were considered a part of his family’s EFC. He and I both disagreed with what the university expected him to pay because they included his early IRA withdrawal as a part of his family income. We made a strong case that the school should reconsider.
More importantly, my client was relentless in his pursuit of education for his children. He paid for his daughter’s tutoring, he spoke to key influencers at the university, he dug up every scholarship opportunity and he engaged his daughter in the process.
This father’s process is the antithesis of lazy and entitlement. This is an example of a man and a daughter who desperately wanted a better life for the next generation. I was thrilled to see their passion. The lessons learned in this process were surely etched in the daughter’s mind and will give her the required work ethic and appreciation for her university experience that her dorm-mates will lack.
I typically don’t go this deep with my clients on financial aid (we usually refer to our friends at Lumerit), but this client had my attention. He was working hard, and I wanted their family to win!
When your child is ready to leave for college, remember, proper planning on the parents’ part shouldn’t solely be focused on just financial services.
Parents typically have a lot of questions when it comes to planning for their children’s education, but don’t forget, the children may have questions too. And the conversation shouldn’t just be a financial one. Parents should make sure their child is ready for this time in their life and prepared to take on the world on their own. And we’re not talking about just financial services.
Here are 5 topics every parent should discuss with their new college student
Make a plan with your student to check in with you on a regular basis. Whether that means every day, once a month or before finals, establish a schedule so both you and your student feel comfortable that the other is OK.
Also discuss emergencies. What is an emergency? What should your student do? How should they contact you?
In addition to phone check-ins, make a schedule so your student knows when he or she should come home. Family birthdays? Major holidays like Christmas and Thanksgiving? An annual family reunion? You may assume your student knows these dates by memory, but the truth is, they probably don’t. Talking early will eliminate any confusion or conflict if plans are made otherwise.
The family should make a plan to visit at specific times too. When’s graduation? Family Day? Homecoming?
You may want to discuss with your child how he or she will be getting around campus, to and from work, etc. Do they have to worry about parking? Gas? Public transportation? For many kids, college is the first time they are on their own.
4. Money and Budgeting
Consider writing up a contract before your child leaves for school (we can help).
Agree ahead of time that the student will get money in the following ways: $X from job, $X as a monthly allowance, $X from financial aid, etc.
To go further, talk about how this money should be spent: $X for meal plan/groceries, $X for spending money, $X for rent, $X for bills, etc.
Then set limitations for spending: “We will handle financial emergencies in the following ways … A financial emergency should include …” Make sure you, as parents, have an appropriate emergency fund in place to follow up with promises if necessary.
5. Dealing with the Unexpected
When challenges arise with things like academics, living arrangements, roommates, financial issues, friends or health issues (physical and mental), make a plan ahead of time. This can give your student a security blanket as they venture out on their own.
Other Topics to Consider
Does your student know how to grocery shop and meal plan, cook simple meals, maintain a budget, do laundry or make appointments? Have you talked to your student about utilizing medical services and health insurance? How will your student stay safe?
PAX Financial Group has many resources to help both parents and their students. Contact us so we can help get you properly prepared for this phase in life. Planning ahead can help relieve stress when financial issues arise.
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