Bobbi Rebell, Personal Finance Expert/CFP at Tally, a debt payoff app, and author of Launching Financial Grownups shared how parents can set money boundaries with their college-aged kids to help foster long-lasting habits for financial success.
For her insights, watch the video at the top of the page or scroll below.
Financial Support as a safety net only.
- We’ve become concierge parents, ready to solve all their problems. Oftentimes this involves throwing money at the issue.
- A Tally survey showed that 79% of parents are willing to help their adult children financially.
- Don’t let money be the first thing you offer to show support. Listen carefully, let them know you care and offer advice.
- If they need money, encourage them to look at expenses, create a budget and/or explore ways to increase their cash flow through a work study program or paid internship. Bonus, this is an opportunity to get more on-the-job experience too.
- A mark of successful parenting is for your child to no longer need you for financial support.
Don’t jeopardize your own financial future.
- Don’t be tempted to overextend yourself to send your student to their pricey dream school or put your financial health at risk to help. Taking on debt to solve their problems, especially as interest rates are rising, will do more harm than good.
- Tally’s survey showed that parents of adult children with credit card debt are twice as likely to help their adult children financially by taking on credit card debt.
- Retirement is guaranteed. Taking on debt to “help” them sets them up to have to support you financially as you age. Too many parents count on playing catch up with retirement contributions after they pay for college but usually they’re left with no plan B when their income or life circumstances change unexpectedly.
- As interest rates go up, prioritize paying off your own high-interest rate debt, which for most people is credit cards. In fact, credit card debt grew by $46 billion in the last three months.
Be the sounding board, not the solution.
- Lots of young adults take on debt carelessly because they don’t understand the cost of paying it back. Have conversations proactively with your college children about debt.
- Educate them on how debt can be used as a helpful tool in certain scenarios, like building a credit score or funding their education. But make sure they understand the cost associated with it.
- Help them to plan how they will pay down any debt they take on to finance their education, taking career choices into account.
- For example, you may need to cosign for an apartment, or help them determine which dorm to live in, don’t help them overpay! They may want the most modern amenities or avoid having a roommate but these are costly conveniences.
- Make it known that you will not pay off their debt, but they can come to you for guidance.
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