Back-to-School Finances: Setting Your Child Up for Success in College and Beyond

As the back-to-school season approaches, many families on the Main Line are gearing up for a significant transition: sending a child off to college or into the workforce. This time of year is not just about buying school supplies or preparing dorm rooms; it’s also an ideal moment to have important financial conversations with your young adult children.

Here’s how you can help your child prepare financially for this new chapter:

Help your child establish a budget for the next phase of life A new phase of life often brings a new set of expenses.

Establish a Budget for the Next Phase

Whether your child is heading to college or starting a job, they’ll likely encounter new expenses. Now is the perfect time to sit down with them and map out a budget. For those attending college, this might include tuition, textbooks, housing, and food. For those entering the workforce, it could be rent, transportation, and daily living expenses.

Use online budgeting tools to break down these costs and allocate funds appropriately. If you’ve been covering most of your child’s expenses during high school, this conversation will help them understand the true cost of living. Whether it’s the price of a weekly grocery bill or a night out with friends, gaining this perspective early on is crucial for their financial independence.

Set Clear Financial Expectations

As your child steps into adulthood, it’s essential to define what financial support they can expect from you and what responsibilities they need to shoulder themselves.

For college-bound students, discuss how tuition and other expenses will be covered. Will they need to apply for scholarships or take on a part-time job? Encourage them to fill out the Free Application for Federal Student Aid (FAFSA) to explore available federal financial aid. If loans are necessary, review the terms together to ensure they understand interest rates and repayment schedules.

For those entering the workforce, discuss how they’ll manage their living expenses, including rent and commuting costs. This is also a good time to explain what a post-tax paycheck looks like and the importance of saving a portion of their income.

Consider Alternate Ways to Offer Support

While it’s natural to want to support your child, it’s equally important to encourage their financial independence. Consider differentiating between funding essential milestones—such as college tuition or a car for commuting—and ongoing lifestyle expenses like entertainment.

If you plan to cover all costs while your child is in school, establish clear boundaries and set an end date, such as graduation or when they secure a full-time job. For larger expenses, like a new car or graduate school, you might consider co-signing a loan instead of paying outright. This approach can help them obtain better loan terms while still taking on some financial responsibility.

Plan for Future Milestones

Once you’ve set expectations for your child’s immediate financial needs, it’s wise to discuss how you’ll handle future milestones, such as a wedding or buying a home. Money can be a sensitive topic, and it’s important for you and your partner to be on the same page. Recent studies show that while many couples support their adult children financially, not all agree on the extent of that support.

Having open and honest discussions about your financial strategy will help ensure that you can assist your children while also staying on track with your long-term financial goals.

Final Thoughts

As you prepare for the upcoming school year, take the time to engage in these crucial financial discussions with your child. It’s an investment in their future that will pay dividends as they grow into financially responsible adults. Remember, your financial advisor can also provide valuable guidance to help you navigate these conversations and ensure you’re making decisions that align with your overall financial goals.

Whether your child is starting college or a career, these steps will help set them on a path toward financial independence, while also providing you with peace of mind.