Volume 28 · Number 2 · Winter 2011
Parents
Going for broke
Illustration by Jay Leek/UC Davis
Fiscal reality is something young people have to learn — and quickly — when the budget becomes their own responsibility.
The most important financial lesson for students to learn during their college years is that money doesn’t grow on mom and dad. And if, by some miracle, it does, then young adults still need to learn to grow their own. Money, that is.
Money is power. It makes the world go round and even though it can’t buy happiness, it does go a long way toward financing a college education. And that is a bummer for college students. At the very moment in their lives when they want to assert their autonomy and declare their independence, they have to keep asking their parents for milk money.
Of course, there are exceptions. A handful of students are truly financially independent. They work their way through college without family support and without amassing debt, demonstrating very little consideration for banks and credit card companies that are struggling to pay their executives seven-figure bonuses. These students could teach us parents a few things about fiscal management. In fact, I asked some of them for free money tips, but it turned out they were always too “busy” working full time and going to college. Probably just a brush-off.
Other kids who handle all their college costs include students on full scholarships, lottery winners, poker champions, Internet moguls, trust-fund babies and racketeers. Pretty much everybody else attending a four-year college has expenses that exceed earnings. They’re deficit spenders. But deficit spending is such a harsh term; it makes college students sound like a bunch of financial deadbeats. Let’s call them leveraged investors.
After all, a college education is an investment in the future. When students take out loans to finance college costs, they expect their investment will ultimately pay off in a higher salary, which they’ll need some day to cover the cost of college for their own kids.
If parents help students pay for college, the return on the investment is indirect. Parents sacrifice. Kids benefit. That’s just what parents do for their children. Their reward comes from the satisfaction of seeing their kids grow up to be educated, productive, compassionate adults — the kind who might one day be financially successful enough to invite an elderly parent to live in their home, even an addled rock ’n’ roller who thinks Bruce Springsteen is president and endlessly repeats the same old boring stories, one of which concerns a Pet Rock he had during the 1970s.
Wait, where were we? Financial independence. This can be a bewildering goal for kids to embrace during college, when most students are either in debt, on the dole or both. Ultimately, parents hope their college students mature into fiscally responsible adults who spend less than they earn. Of course that means they’ll probably have to leave the United States and renounce their citizenship, because no Americans currently fall into that category.
In the short term, parents would settle for college students who simply: (a) realize they are on a limited budget and (b) spend accordingly.
This is a lot trickier than it sounds. Back when hides were used for currency, it was pretty clear when the pile of buckskins on the dirt floor of the log cabin was getting low. Paper money made purchasing more convenient, but people could still see when their wallets were empty. Checking accounts eliminated the need to carry cash, debit cards eliminated the need to write checks and credit cards eliminated the need to acquire money before you spend it.
Cash is still around, but college students never touch the stuff. They swipe plastic.
Problem is, a plastic debit card looks exactly the same whether the bank account is empty or full. But don’t worry, your kid won’t rack up 11 overdraft charges in one month to buy grande vanilla lattes on her debit card, bringing the cost of each cup of coffee to roughly the GDP of a small island nation. Well, maybe she did that last year, but she’s grown older and wiser, plus the feds have made it harder for banks to charge fees like that now. They also passed a new law to prevent companies from dangling credit cards in front of starving students until they’re 21, unless parents agree to co-sign — which I will happily do for our children, once I’ve lost my wits and ceded power of attorney.
Budgeting is not human nature. We spend like there’s no tomorrow because, evolutionarily speaking, there was no tomorrow. Life in the Stone Age was short and brutish, and it was OK to take on debt at a high rate of interest because Paleolithic man thought it would help build his credit history, plus he didn’t expect to be around long enough to pay it off.
College students, on the other hand, have long, promising lives ahead of them, and they need to learn to live within their means. One of the biggest surprises they encounter upon leaving home is that they have no means.
If they’re lucky, they have support from parents or the government or the financial aid office to pay for necessities: food, clothing and an iPhone 4 with a decent data plan. They also need someplace to keep their cell phone dry and recharge it at night. A triple dorm room works well enough. Then there are fees, books, a laptop and Internet access for viewing YouTube and checking their bank balance. Turns out that beyond these basics, everything else is just a frill. And the Free Application for Federal Student Aid doesn’t factor in frills.
Did you hear that anguished outcry? That’s the sound of college student expectations crashing into financial reality. And then, wait for it . . . usually so long that parents begin to squirm . . . the lilting strains of parsimony. Students flipping off light switches as they leave the room. Snipping coupons before grocery shopping at the local discount store. Telling their roommates to turn down the thermostat and put on an extra sweatshirt.
On a trip to visit our son at college, I overheard him scolding his younger brother for complaining about some overripe bananas I had brought along to share in the car. “You know,” the oldest lectured his brother in a very parental tone, “You look at food differently when you’re on a budget.”
The cost of college: cha ching! The value of an education: priceless.
Robin DeRieux can be reached at rdderieux@yahoo.com.