3 Things Parents Need to Do to Prepare Their College Students

Fairfax, VA - August 21, 2003 - High school graduates will soon leave home for college and embark on many new experiences. Their parents have done their best to prepare them for this new independence. Or have they?

"As parents we have done our best to prepare our children to leave home and go out into the world of college and/or career," said Dave Jones, president, Association of Independent Consumer Credit Counseling Agencies. "However, many of us have failed to prepare our kids for financial independence."

AICCCA recommends three things parents need to do to prepare their college students for financial independence.

1. Explain how credit works. Credit card companies set up booths on college campuses and your college bound student will be offered a free T-shirt or other give away for signing up for a credit card. Signing up to get the free shirt and not necessarily the credit card, many teenagers often do not understand that using the credit card they receive in the mail can result in bills they are unable to pay. Nellie Mae reports that under graduate students had an average credit card debt of $2,327 in 2002. Make sure your teen knows using a credit card is not free money; it is instead a means of putting off paying for purchases until a later date. The bill will arrive and the creditor will expect to be paid. Charges add up quickly and without a spending plan a teen can end up in credit card trouble in a hurry.

2. Create a spending plan. A map of where you are going is the best way to avoid losing your way on the road to financial independence. Together, you and your teen should sit down and develop a spending plan. Write down all college expenses: tuition, books, room and board, toiletries, entertainment, etc. Include those things for which you will be paying and those for which your child will be responsible. It is important for your student to know all the costs of college and from where the income to pay those costs comes. For example, scholarships, loans, money from the family or some combination of these may pay for tuition, books and room and board.

Other income such as a part-time job or spending allowance will determine the amount that is available to spend on the remaining expense items in the plan. Students should come away from this session with a good idea of how much they will have available to spend each month. The 1999 Youth and Money Survey reports that ninety-four percent of youth cited their parents as their primary source of financial education.

3. Come to a no bail out agreement. Agree beforehand that students are going to take full responsibility for their finances at college. As with any new responsibility, some college students will end up charging more than they can afford, run out of money before the end of the month or be in debt to their roommates. A parent's first reaction is to send money and bail their child out of the financial hardship. Don't do it! If you do it once, you will probably be asked again. The financial lesson of overspending will not be learned if you send money. The students need to figure out that they will have to work on the weekends or stay at home when their friends are going out to earn or save money to pay off their debts, not that mom and dad will come to the rescue. They are much less likely to make the same mistake twice when the solution must come from them.

Founded in 1993, Association of Independent Consumer Credit Counseling Agencies (AICCCA) is a national membership organization, established to promote quality and consistent delivery of credit counseling services. AICCCA and its members are focused on improved creditor relations, efficient processes and advanced technology to best serve clients and creditors. AICCCA members are independent nonprofit agencies that advocate for debtors, counsel millions of consumers annually nationwide and provide debt management services to consumers with excessive unsecured debt. For more information or to contact an AICCCA member office call (800) 450-1794 or visit www.aiccca.org.