Before you know it, the kids are going off to college, taking that first job, or moving out.  Isn’t it wonderful to observe their new sense of independence? After all, that’s why we’ve spent so many diligent years teaching them a sense of responsibility. 

Are you aware that teens entering college today have been labeled the Boomerang Generation? That’s right – you throw them out into the world and they come whirling back, into the comfortable arms of home. College grads defend this behavior (and so do their parents) because some contributing factors make their move into the real world less appealing.  Rising home prices or apartment rent could be the culprit.  So could the inability to either get a job or live on the going rate for an entry level job. Then there is the student loan that needs to be paid back within months of graduation.  All these factors can be so scary that students are rushing back home in big numbers to the comfort of mom and dad and those home cooked (free) meals.

You can stop the battle of the boomerang before it begins. It’s important to teach your young adult the basics of living independently. Typically there are no high school programs about developing Life Survival Skills, so parent, it’s up to you. Get down to the basics early on. 

Think back at how you have been raising your children.  Do they know how to do their own laundry?  Prepare a meal or a snack on their own?  Resolve their own problems with friends and at school?  Do they share home chores with you?

Most of all, do they save and spend their money wisely?  As a person who has counseled hundreds of teens and their families about getting ready for college, I can tell you that most students who cross my path, while they may be academically successful, lack savvy in financial matters.

Here are some ways to get your child started early.  The first step is for trial and error.  Do you remember when you first started trying to be a grown up?  Much of what we tried had quite a few errors attached, and some of those were quite expensive.  Let’s see if we can help your child do better than most of us did.

• Establish a checking account for your teen. Accounts for underage kids must have a signatory, which is a good thing.  You both have access to the account.  Review the terms and conditions of the account with your teen. It may seem like concepts such as  check fees, overdraft charges, or online banking fee are inconceivable to the young one, but anyone who can understand cell phone or Ipod instructions can catch on the banking. If your daughter bounces a check and has to pay, the bank will be the messenger, not you.  That’s what it’s like in the real world.

• There may be a debit card with the account. Once your teen gets anything that looks like a credit card he may be surprised to find that money is automatically taken out of the checking account when it is used.  One problem – when money disappears it has to be replaced.

• Are you sure that your child is ready for a credit card?  I’ve seen families get into real financial trouble because their college student racked up limits on multiple credit cards.  Somebody’s got to pay. Only after your child proves to be astute at handling a checking account should a credit card even be considered. 

• Here’s a six letter word that may be difficult for you kid to understand – budget.  Together, list the expenses that you have because of your child, like cell phone, computer, car maintenance and insurance, meals, dates, high school expenses, clothing, and spending money.  Parents realize how much it costs to keep a kid, but kids seem to think that money just appears to make them happy.
  

•  Bills, bills everywhere.  Paying bills isn’t the most fun way to spend an evening.  Parents have to do it, so let your kid get a taste of what it’s like.  Practice in writing out checks can make the task seem less intimidating. Proficiency and punctuality in paying bills is the goal.

• Paying the big bills. Even if you as the parent have claimed responsibility for higher priced items like tuition, insurance or car repairs, it would be a good idea to have your teen make the payment, either on line or by check.  It’s quite an eye-opener to observe how real money goes towards real life. Have your teen start making that payment through his account.  Even if you plan on reimbursing him, it’s better for your son to get the experience instead of you controlling the whole process.

• Shopping for groceries.  Teaching your child to shop wisely is one of the wisest lessons you’ll ever teach.  The lesson that will extend into other areas, like shopping for those HDTVs and sound systems that can vary in price by hundreds of dollars.  Learning to buy on a budget is a great lesson. Comparing prices at a discount grocery store versus a smaller grocery store or convenience store will help your child see how choices can make a big difference.
  

• Shopping for generic brands can save money. Looking for sales items is another way; and combining sales items with coupons is an even better way to save big. For practical how-to lessons in shopping go to www.cutouthunger.org.  Many clients have saved up to 60 or 70 per cent through this web site alone.

Let’s imagine the college planning process. It has been a long, drawn-out process and the finish line is in sight – college acceptance. Parents and students are mentally exhausted. By the end of the college planning and application process there is not much patience left, and there is the feeling that it’s finally over.  Everyone is ready to move on to that next stage of their lives. 

In addition, just before school starts the summer season is upon us and it’s time to make those summer vacation plans. Enjoying the park, beach, mountains, or wherever becomes a priority.  After all, we want to spend time with our college-bound children before they move on to the next stage in their lives and away from us. 

It’s ironic that most American families spend more time pondering the cost of summer vacation – travel, accommodations and sightseeing – than they do thinking about paying for college.

When you’re back from that summer fun in the sun and that first bill rolls in for the first semester of college, plus room and board, who is going to pay the bill?  You could end up spending tens of thousands of dollars more than you have to. 

What if you don’t have savings, cash, or other resources? There is usually a financial gap between what the college will pay you in terms of federal scholarships and work study programs and what the student has to pay.

When it comes to paying for college these days the first thought is usually to get a loan, the old buy now/pay later syndrome. Have you been thinking about applying for one of those college loans you’ve seen on TV and on the internet? Ads are everywhere.  Why?  College lending is a lucrative business – the lender stands to make big bucks from your immediate cash emergency. 

Is this the way to go? Are you ready to borrow away your mortgage or retirement fund for the sake of your child’s education? When there is a gap or shortfall in paying for college, the first thing parents mention is how much should be borrowed. Before you sign on the dotted line of a loan document, think twice. There are other options. Most of my clients are surprised when I tell them that they may have other choices in how to pay for college.  Their response?  “I never thought of that.”

One of these options involves cash flow analysis of the way you spend money right now. Before you start yawning at that suggestion, consider how easy analyzing your cash flow can be. It merely means that you can look at ways to effectively use your current income and structure your spending habits around that. A thorough understanding of cash flow is neglected by most, and that means that some families are taking out student loans when they don’t have to. They simply could have restructured what they already have. 

• Some of the easiest things to consider are costs that can actually be eliminated when your student goes off to college. Won’t it be nice to see your grocery expenses nearly cut in half?  Did you pitch in on your student’s car insurance and gas fill-ups?  Those days of awarding allowance money and paying for high school activities, outings, sports and clubs, as well as books, supplies, and lunches are gone. How much money will that save you every month?
  
• The next step is to determine your excess or discretionary cash flow.  First take a look at your fixed expense categories, like mortgage, utilities, car payments, home and car insurance, health insurance, and credit card payments.
  
• Next, figure out how much you are spending for discretionary activities like dining out, sports events, hair and nail appointments, clothing, and specialty coffee every morning.  Once you take the opportunity to see where your money is going and decide if it’s worth it, you will probably find some obvious ways that you can cut back or at least readjust your spending.   

The results I see when my clients complete this easy three-step analysis are incredible. By making some adjustments on the home front, some big changes can be made for the future. 

Eliminating $15,000 per year in loans is a good start. Although that seems like a big chunk of change, many families are surprised to find out that they can come up with that kind of money before they need it.  How would you or your student like to not have a $60,000 loan at the end of a four year education?  My clients can attest – there are some wonderful ways to use that $60,000, instead of paying off a giant student loan month after month for the next decades. Wouldn’t it be great to keep that money tucked away for your retirement or make sure your student gets a great head start in life, without being loaded up with long term debt? 

Ready, Set – Go for a college degree, without the debt.  The road to financial freedom may begin with these three easy steps.