Parents teach their college students Finance 101

SACRAMENTO — Two kids, two college tuitions. Add it up: One very big college bill.

For John and Ellen Wong of Sacramento and many other parents, paying for college is no trivial expense. With two teenagers heading to campus this fall, the couple’s total annual tab is about $66,000.

That’s roughly Ellen Wong’s entire annual salary as a public high school instructor.

“We’ve been saving since they were babies,” said Ellen Wong, who said the couple are determined to get their kids through college without relying on student loans.

How to ease the pain? As thousands of college students nationwide head to campus this fall, here are some Finance 101 notes:

Have the talk. Sit down and talk clearly as a family about who will pay for what. What you want to avoid is a tearful phone call home that your freshman has drained the bank account or overdrafted the debit card.

In some families, Mom and Dad pay for basics (tuition, food, monthly allowance) while students cover the rest (off-campus meals, clothes, entertainment).

“Each family needs to have those discussions, depending on their finances and what they can afford. You need to be clear,” said Donna Bland, chief executive of Golden 1 Credit Union in Sacramento.

This summer Bland had her son, who will be a freshman at DePaul University in Chicago this fall, start buying his own essentials at the grocery store, just to get a feel for what things will cost once he’s on his own.

“I want him to have a stake in it. There are so many basic things — toothpaste, Tylenol, laundry detergent — that a student will need to buy on their own.”

The Wong siblings — Nolan, 19, a UC Berkeley sophomore, and Delaney, 17, a UC Santa Cruz freshman — are expected to pay for their extracurricular expenses, whether it’s joining a fraternity or buying concert tickets. They’re also buying their own textbooks.

To do that, both got summer jobs. Nolan earned $10 to $15 an hour as a dog washer for a local pet groomer; Delaney took home $8 an hour — after taxes — as a birthday party host and snack bar attendant at a children’s park.

When they land at college this fall, they’ll each have about $4,000 in their bank accounts.

“Books are a priority; incidentals come second,” said Nolan, who said his only indulgences as a freshman were off-campus burgers and baseball caps.

Last year as a freshman, Nolan paid for his textbooks, including about $490 for his two chemistry classes. Whenever possible, he bought used books and compared prices online at Amazon.com.

This year, the molecular toxicology major is saving roughly $900 a month by living in off-campus housing with a minimal meal plan. He’s also bringing a rice cooker for making dinners with his roommates.

It’s all about one shared family goal: graduating in four years with no student debt. The Wongs are pulling together a combination of savings, work-study grants and a small amount of financial aid.

Last year, with only one child in college, the Wongs filled out the Free Application for Federal Student Aid form, which determines a family’s eligibility for federal grants, loans and work-study.

“We didn’t get one penny in federal financial aid,” noted Ellen, whose husband is a high school social sciences teacher.

This year, with two kids in college, the Wongs qualified for a combined $16,000, which includes a work-study campus job for Delaney, who’s majoring in environmental studies.

Altogether, the Wongs figure their out-of-pocket costs for college this year will run about $50,000.

Do a budget. Creating a college budget doesn’t have to be a tedious, laborious process, said Joseph Audette, 29, vice president of financial literacy for NerdWallet.com, a San Francisco company.

It can be as simple as “writing it on the back of an envelope with pen and paper,” he said, or more sophisticated, using budgeting sites such as Mint.com, where you can visually track your spending.

As a freshman at MIT, Audette used an Excel spreadsheet that listed his monthly income (scholarships, savings, Mom and Dad) and his expenses (cellphone plan, off-campus meals, weekend entertainment).

Far from being a drag, the exercise “gave me confidence to know what I could spend, especially on weekends,” Audette said. “Knowing when I could go out, and when it was better to stay in, actually made my life less stressful.”

It also made him realize he needed to supplement his income, which included taking odd jobs as a DJ, a medical test subject and a campus administrative assistant.

Similarly, Delaney Wong has applied for a seven-hour-a-week campus dining hall job for her work-study grant.

Debit or credit? It’s one of the big debates, especially for freshmen new to money management. One side says a credit card — paid off monthly — is a great way for students to start building a healthy credit score. Others say credit cards can lead to freestyle spending, missed payments and a pileup of penalties, late fees and rocketing interest rates. Not to mention a beat-up credit history.

“A debit card allows them to spend what they have, not what they don’t,” said Bland of Golden 1 said.

She advises college students to set up mobile text or email alerts that let them know when their account balance is running low, thus avoiding overdraft fees.

As for credit cards, recent a federal law aimed at protecting college students does not allow anyone under 21 to be issued a card unless they can show proof of repayment (i.e., a job) or have a parent co-sign.

“There’s value in having a credit card, but only for emergencies,” Bland said, such as a medical emergency or a last-minute flight home.

Buck writes for the Sacramento Bee/McClatchy.