[2008] College, kids and finances..what to do?

[BigAl_50]

The old saying "a champaign taste on a beer budget" best describes my 21 year old daughter. The last eight months she had a great paying job and now that college is starting, she has zero saved and 5 credit cards with a $4,500 debt. She is a junior in college with a 3.4 GPA and lives off campus.

While growing up we tried to instill the value of a dollar, spending what you make for what you need and save for what you want. Is it "today's generation" of wanting instant gratificaiton for material things or ?

She has the promise of gainful employment in a couple of months that will give her the income to live on. But what do we do now; advance her the money and have sign a promisarry note? Do "tough love" and let her work it out? I want her to learn from this but not that mom and dad will be there to bail her out.

Input please.

 

[Rose Pink]

How upset is she? If she is in deep distress, will it affect her studies? Before bailing her out, sit down with her and help her make a plan to dig herself out. Map it out on Excel, for example. If this is the first time she got herself into trouble, she may learn quickly from the experience. If it is a lifelong habit, you have a bigger problem.

We've helped out our children from time to time and none of them expect us to always be their personal ATM. OTOH, we have one family member in her late 40s, married with grown children, who still asks her daddy to bail her out from time to time.

Let your child know you love her and will help her but not necessarily with money. You are at the age where your own retirement plans need to take priority over an adult child's needs. Best of luck.

 

[AwayWeGo]

A Generational Phenomenon ?

Input please.

My parents grew up during The Great Depression & never got over their fear of financial insecurity even though they came through it OK & went on to live a comfortable USA suburban middle-class lifestyle.

The Depression's psychological impact on them carried through to the way they imprinted their children -- my sister & brother & me. The Chief Of Staff's family brought her & her sister up pretty much the same. Both of us grew up ingrained with a strictly deferred gratification orientation that not only stuck with us but that rubbed off (pretty much) on our 2 sons.

In our 44 years together, we have borrowed money only to buy homes. Everything else -- cars, TVs, furniture, appliances, you name it -- has been either cash on the barrelhead or charged to a credit card that we pay in full every month (i.e., no ongoing credit card balances).

Today, we can live high on the hog. Starting out, however, lots of gratification got deferred, bigtime.

We came back from our honeymoon trip in our (paid for) car with exactly ten cents cash between us.

The actual honeymoon lasted another year or so. I knew the honeymoon was over when we bought our 1st TV set -- a (new) Zenith 17-inch black-&-white portable after a year or so when we did without television. Over the years since then we've bought truckloads of TVs -- all used.

Shux, we even buy our timeshares resale. How cheap is that ?

Obviously, not everybody gets inoculated with the el cheapo ethic that we grew up with. How to plant that idea in spendthrift kids is a major serious challenge. Maybe some of them will catch on by starting young to save & invest -- to see while they're still at a tender age how compound interest boosts their wealth while they're out earning more.

Of our 2 (grown) sons, 1 practices financial responsibility & is building up personal wealth to use for the education of his children & for his own future retirement needs. The other lives strictly hand to mouth, with an added helping hand even now from Mom & Dad.

Go figure.

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

 

[mgeez]

You have to walk a fine line. 3.4 gpa is impressive. So is 4500 cc bills. I would support her and pay for anything related to college as long as that gpa is maintained. I would not say anything regarding the cc bills. Let her deal with the cc company and maybe she will ask for help after things progressively get worse.
Mgeez

 

[wackymother]

All the "free credit" offers are far too tempting for many adults, much less young people who are just starting out in life. I would go with the loan/promissory note idea.

 

[dmbrand]

I also have a daughter in college. I truly believe that today's young adults will take longer to acheive the independence and maturity that we had at their ages.(Most likely caused by us....loving, provide-all, well-meaning parents!) Here is one suggestion.

You do not want to see your daughter flounder under all this, especially since she is in school and has a job in the future. Look at your help as a "bridge" for now. Harness the credit card situation. Get her to agree not to apply for anymore, and give you the cards. It is still her debt to pay off, but you could make the minimum payments for her until she gets the job. Then give the responsibility back. You decide how much to provide for food/rent. This is akin to giving her enough rope to pull herself out, but not enough to hang herself, or pull you in!

Only you know your daughter's personality. If the debt incurred and spending ways are a result of addictions to anything(smoking, drinking, gambling, etc), then the above suggestion probably won't work. My daughter doesn't make the wisest choices with her money right now, but I hope with the advice we provide(on a daily basis!), she will eventually become like us.(She may be 32 by then, though )

Let us know, in time, how you handled it and the results. Parenting can be tough! DawnB

 

[Tia]

My kids are 15 and 17 so much to look forward to yet . I'd be so tempted to only help if the cards were cut up and no more credit cards. Maybe seeing an example of how long it will take her to pay the cards off paying only the minimum will shine enough light?

 

[lll1929]

Interesting thread.

Although my child is only 13 yrs old, I have her starting 3 yr CDs now so she can have money saved away. I would imagine that she too will run into situations such as these and hopefully she will learn a leason regarding saving and debt.

In regards to your situation, I would pay the min for her, suggest she cut up the credit cards, have her sign the promissary note and review her credit rpt with her every 6 mths to ensure she has not gotten additional credit cards.

Good Luck.

 

[mepiccolo]

If she is going to have a good job in a few months then don't rob the opportunity for her to learn a very valuable lesson here. She probably can still work at least on weekends to pay her own debt, even if it is just the minimum on her credit card bills for the next few months. If you don't want her to work while she is in school then have her earn the money from you by doing things such as housecleaning. This will build integrity instead of kill it by bailing her out. In 10 years she'll be grateful she had to learn about overspending now, instead of calling you in 10 years because she did it again. Isn't that what bailing her out will teach her? Just because she's going to have a good job doesn't mean she won't go out and spend even more money then and be $10,000 in debt. She's an adult now - let her learn the lesson and cut up her own credit cards instead of having you do it like she's still a naughty child. As long as she's not going hungry or homeless and she's still in school we're only talking a few months hardship before she can work to pay off her debt on her own. Have faith in your kid to learn from this.

 

[sfwilshire]

I have the same song different verse with my #2. Not sure what I'm going to do either.

My Mother left #1 and #2 enough money to get them through school. #1 worked and was fruggle, and got through school with about half the inheritance left for law school. #2 took about 1 1/2 years to pi@& his away and now has no money to go back to school for year three.

The good news is that he'll get more financial aid now that he has zero money in the bank. Still not sure how much I'm going to have to cough up to keep him in school. Can't realistically make him just take a year off because that will impact his lottery scholarship, which pays for a big chunk of his costs.

Sheila

 

[geekette]

She got herself into this mess and will have to get herself out.

I had to pay for college myself (with maybe a couple hundred in parental assistance each semester but I could not get loans because my parents "made too much" and would not let me emancipate). I came out greatly in debt because I had to find ways to finance college and sadly, much was credit because it was often the only option.

I lived quite frugally, while my friends were going out partying all the time, shopping, going out to eat. Not me, I had responsibilities, such as working full time and getting good grades. I'm not that special - I did it, and made Dean's List in what was a Top 10 program.

But I don't know what 'your deal' was with your daughter. I would not go beyond the original arrangement because she knew what it was.

As a pp said, this is a great opportunity for teaching a money management lesson. I am quite fiscally responsible as an adult, and much of that comes from those early lessons. Yeah, it was hard, it was stressful, and everyone had more fun than I did. BUT, I'm better for it. Debt is a great teacher and having to chip away at it over many years was both depressing and liberating as I watched the balance drop.

 

[vacationhopeful]

Your daughter needs to understand this is her problem. She needs to get a real job - waiting tables, working McDonald's, UPS, babysitting, etc. The promised high paying job is like Wimpy's "I will gladly pay you Tues" as he wants to eat hamberger today - your 21 yo adult has had her fun, Tuesday has arrived. The minimum payment over a month of parttime work can be cover by her working - she just won't have as much fun or free time.

Today's kids are only growing up "late" because parents don't want them to go without IPODs, cell phones, high speed internet, nice cars, lattes, pizza and working on Sat. nights. Do her a really big favor - don't even hint at lending her money, hand her the want ads.

Just MHO,

 

[BigAl_50]

Input so far is very much appreciated; the "showdown" will be Saturday afternoon. Right now I'm leaning towards the cut up ALL the credit cards except one for emergencies (statement will come to our house for review), minimum payment made by her until the job comes through and PT employment; even if it's "do you want fries with that".

I told her there would be tears, high emotions and tough decisions.....but I didn't know how her and her mother would react.

 

[Blondie]

It seems now is the time for her to understand her spending habits. Bailing her out does not ensure that she will not continue to spend- only that the $4,500 gets paid. From what I see people have to have an awareness of their own motivations and temptations, and accept what those tendencies can bring about. She needs to curb her spending and get real, NOW. Otherwise, she will continue to rack up debt.

 

[nygiants11991]

I agree with mgeez. Support for school expenses and she is on her own for the credit cards. While waiting for the good job, she might have to get a job somewhere else to pay for her debt. She is 21 and I think taking her credit cards and having the statements sent to your house is treating her like a child. She made the bed she should have to lie in it.

Others may disagree with me, but as a parent, I think it is our responsiblilty to help out with schooling. To an extent though, books & tuition. And a little help with the living expense. All the extra's need to be on them.

I have 2 in college and that is what we do whether right or wrong.

 

[talkamotta]

Everyone has thier own ideas on education of thier children.

My dad wasnt going to pay any of my education because "She is just going to get married".

How times have changed.

My x-husband never paid any of my 5 kids' education. Thought it was thier problem.

I paid thier first 2 years if they went to the community college and maintained a 3.5 gpa. They could live in my house free but any cars, etc would be thier responsibility. The tax credits I received almost paid me back for thier tuition.

There are many programs/mini grants out there for students to get portions of thier schooling paid. Some companies will pay for tuition or at least a big portion. Local hospitals will pay for nursing students to go to college if they sign a 2 year contract to work for them after graduation.

My son (engineering)and his wife (sports medicine) are both getting thier college paid for by doing internships. This has extra benefits not only are you getting experience in your field but you have the opportunity for some invaluable networking.

Kids now not only need a bachelor's degree they need a master's. I always figured any help I could give them (if they were trying hard too) was worth it.

 

[DeniseM]

Input so far is very much appreciated; the "showdown" will be Saturday afternoon. Right now I'm leaning towards the cut up ALL the credit cards except one for emergencies (statement will come to our house for review), minimum payment made by her until the job comes through and PT employment; even if it's "do you want fries with that".

I told her there would be tears, high emotions and tough decisions.....but I didn't know how her and her mother would react.

you and your wife should agree on what you are going to do before you meet w/DD and present a united front to your daughter. i agree with your plan otherwise.

 

[mepiccolo]

I agree that parents help their kids with school expenses such as tuition and books, if they can. However, here it sounds like the daughter ran up her credit cards on things other than school books, etc. What about her having a garage sale to make some of the money back - another great way for her to get a realistic view of what the "value" of those $100 jeans are, just as an example, now that someone is only willing to give her maybe $5 for them. I also got into credit card debt in my early 20's on stupid things like clothes and going out to eat, etc. My parents didn't bail me out. Now I look at $100 or more pair of jeans and go, "Yeah right!" Plus I worked at Zody's (like a Kmart) and often times saw the same clothes there that I saw at the mall marked up 2-3x what you could get it where I worked, which gave me a realistic view of what someone should pay for clothes. I have no desire to pay an expensive store alot of $$ just because it's being bought there instead of a discount type store. I believe I'm the better for it and I learned this valuable lesson from having to get MYSELF out of credit card debt in my early twenties. I really hated the clothes I had bought that had gotten me into debt

 

[somerville]

If you help her out, make her get rid of the credit cards. However, I would not abandon her in time of need. There are known instances of suicide by students who got into credit card debt.

 

[jlr10]

We are getting ready to begin this process with our son. We advised him if he got the grades to get into college we would pay for it. He got in and we will pay for tuition, housing and books. We told him he wouldn't have to work the first sememster if he took a full load, so he could adjust to college life. He signed up for 12 units. We told him that wasn't full enough to warrent not working and to get a job. We would not be providing money for extras only housing, tuition and books. He agreed that was fair and is planning on visiting the career center shortly after he arrives on campus.

We told him we would contribute a very small portion towards a laptop for college, and we expected him to pay for the rest out of high school graduation funds or his savings account. He scaled down his desire and is content with the computer he mostly paid for. It has some bells and whistles but not very many.

We tried to raise him to think of credit as something that is a big ticket item such as a house and a (reasonable) car. As for credit cards we have tried to raise him to think of them as a means of gathering points to take vacations. He should never use a credit card for a purchase unless he didn't really need to use the credit card. All credit card bills are to be paid in full on receipt. If they can't then they shouldn't be used.

Last night he asked if he could live at home for a year after he gets out of college so he could pay off any student loans he takes out before he moves out on his own. We said yes, and we encouraged him to live at home for that year to save and prepare to move out on his own. At least it shows he is thinking about how to avoid long term debt. We shall see how this really plays out. Planning and life aren't always the same.

Then the question remains what would I do if all this proves to be useless and he runs up credit card debt? I think I would ask for the cards, pay them off, destroy them, and make him sign a promissary note, with interest, to pay us off. But with a stipulation that should he fall into trouble again there would not be a second bail out.

My mother went to her mother constantly for money as I was growing up. Because she was bailed out repeatedly she never learned to take care of her self. Within a few years after her mother's death she found herself homeless with no mom to bail her out. I don't want that for my son, so he gets one mistake and then he will be forced to suffer any other consequences. (Don't tell him, we don't want him to know there is one fall back plan!)

 

[Kal]

...But what do we do now; advance her the money and have sign a promisarry note? Do "tough love" and let her work it out? I want her to learn from this but not that mom and dad will be there to bail her out.

Input please.

I would definitely not use a promisary note. My guess is she will ultimately fold on that because it's easy. Rather, have her go to the bank and arrange for a loan which you co-sign. It's much more difficult for her to welch on the bank note. In any event you will very likely end up paying off the note but at least she will start to learn responsibility.

What you're dealing with is a very different generation called the "Age of the Millennials". Go here and read about them. As parents, it will be very difficult to rely upon our own past experiences to provide guidance.

I would also ask her to prepare a budget for the coming school year. This might help her realize the money tree doesn't fruit during the winter. However, the budget will not only give you a tool to monitor her expenditures but also give her a hint of how tight money will be. Also look at each living expense (rent, food, etc) to make changes to be economical. A part time job will be mandatory, but those funds are to pay off the cc bill and NOT to provide money for more needless expenditures.

 

[Chrisky]

We have one son, who now has his own business and doing very well. Our deal with him was, if he stayed in school and got good grades we'd cover his tuition, books and living expenses. Everything else was his responsibility. His car, insurance, clothes, etc. He had part-time jobs to cover all those extras, and never had a credit card.
As he got older, and we were making a large purchase we would always include him in the discussions so that he could see how we came to our decisions and how we had or were going to save for this purchase.
The thing he was made fully aware of was that we would not bail him out if he decided to get a credit card and over extend himself.
When he finally decided to apply for a credit card, when he had a full time job, he was the one that set his limit on the card to only $500.00, and he basically used it only if he needed something done to his car and then he'd pay off the card at the end of the month.
This is a wake up call for your daughter and for your wife as well. She won't be doing her any favours by paying off everything.

 

[MRSFUSSY]

If Your Daughter Has At Least 2 More Years To Go Until Graduation She Can't Very Well Take On A Big, Responsible, High Paying Job And Keep A 3.2 Average Can She? It Would Take Her A Long Time To Pay Off Her Bill Working Only Part Time Etc. This Is A Tough Situation.

 

[vacationhopeful]

I agree 15-22 yo are different today than in my day. They are much more self centered and their parents have more disposable cash.

IMHO, not necessary a good combination .... for anybody's future.

 

[chicklet]

I totally agree that kids today want more than we did (i'm 49). All three of my children 25,23,19 have worked since they were 15 and have purchased their own things ie. tv, ipods, phones. All 3 of them worked during the summer at my husband's work...hardworking auto job getting up at 5:00 a.m. and my daughter has managed to complete 4 years of university without a $60,000 debt. All of them still live at home (including a girlfriend who didn't have quite the same ideas about money as we do) This has been abit difficult because my son will work 3 jobs to save money while his girlfriend isn't as quite an ambitious. We applaude their work ethics but we are repeatedly reminding them of wants and needs. We tell them this is the best time for them to save while they are allowed to live in our home.....if they don't help out - cooking and cleaning - then they will see what real life is all about. I don't think you do your kids any favours by bailing them out of every situation but sometimes they do need quidance but with a little bit of a consequence for their actions. Just my 2 cents worth!