Before Your Kids Start College, Teach Them a Lesson About Money

Angela Wethor learned about money the hard way. She graduated from college $50,000 in debt.

Today, at age 32, she’s counseling parents about the importance of talking to their kids about money before they pack up for school.

“I’ll be paying on student loans until I retire. I cry about it daily,” says Wethor, manager of LifeMap Financial Planning at Lutheran Brotherhood, a fraternal financial services company based in Minneapolis. “But if I can deter anyone from going through what I’m going through, it will be worth it to me.”

The challenge of graduating economically whole has never been greater, says Jack Joyce, a spokesman for the College Board, a New York-based academic association. Financial aid, which used to be made up mainly of scholarships and grants, is now primarily in the form of loans, leaving more students heavily in debt. Moreover, college campuses have become prime recruiting grounds for credit card companies. The result: Today’s average college graduate leaves school $18,000 in debt.

“I’ve seen cases where the dean of students is trying to caution kids about all these things, and at the same time there is somebody in the student union handing out coffee mugs and credit cards,” Joyce says. “Credit card applications are literally falling out of kids’ book bags before they’ve even started classes.”

This fall, as approximately 2.6 million families send their young adults off to their first year in college, they may want to think about Wethor’s message. Spending a few hours going through financial basics before your child goes to school may save him or her from a lifetime of economic woe.

What do you need to talk about?

* A personal budget. While parents tend to focus on the cost of tuition and fees when they contemplate the cost of college, other expenses such as room, board, books and transportation can be even more financially crushing. The average cost of tuition and fees at four-year colleges was $3,243 for the 1998-99 academic year. But the cost of room, board, books, transportation and miscellaneous expenses was more than twice as much, $7,215.

In other words, even if you’ve already handled the tuition, your student is going to have to manage his or her income--from you, loans, grants and work--and expenses. This requires not only knowing how much is coming in and going out, but also when. Discussing how to budget carefully may save you numerous collect calls for emergency cash later.

* Ways to cut costs. A good portion of that $7,215 is made up of variable expenses that your child can reduce by economizing. Consider books, which cost $600 to $700 a year for the average college student. If your child waits to buy books until classes have started--to make sure he or she couldn’t just read the required chapter or two in the library--and then buy used books, that cost could be cut in half.

Also, many students blithely sign up for dormitory meal plans, never looking to see if the plans will fit their schedules and needs. In fact, some of these plans can be a waste, particularly for working students whose schedules might not mesh with the dorm’s mealtimes.

Wethor, for example, says that because she worked at a restaurant--where her meals were free--and wasn’t around the dorm much, the thousands of dollars she paid for meal plans got used for nothing more than diet drinks.

Of course, a big eater with an accommodating schedule can save a fortune with a meal plan that allows unlimited portions at a set price.

Advise your child to consider the details of the plan and how much he or she will use it before signing up. Simply buying groceries might be a better deal.

* Credit. If your child gets into credit trouble in college, the bad credit history will probably dog him or her at pivotal moments later in life, such as when trying to finance a house or car.

Students are likely to be offered plenty of credit of their own, so make sure your child fully understands the repercussions of charging too much.

And because students are likely to need some type of credit card to handle emergencies, some experts suggest that parents get their child a card that’s tied to their own accounts so that they can track--and limit--charging.

“Talk about in what circumstances they’d use the card, when they could use it at their own discretion and when they should discuss a purchase with their parents,” suggests Jan Holman, vice president of investment services at American Express Financial Advisors in Minneapolis.

* Health care. If your child is covered by your health plan but will be too far from home to see his or her regular doctor, you might want to investigate which doctors in your plan are near the college.

* Phone bills. Consider getting your child phone cards. Although these prepaid cards don’t offer the cheapest rates, most are considerably less expensive than collect calls. Getting phone cards would impose a calling limit on your student. When the money on the card runs out, so does the call.

Send letters to Times staff writer Kathy M. Kristof in care of Personal Finance, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053, or e-mail kathy.kristof@latimes.com.