College is a costly but important adventure. For this reason, it’s a good idea to have a conversation with your child about the costs of college as early as middle school. Together you can start researching various ways to finance your child’s degree. One conversation you should have with your child involves options regarding luxury items versus school costs. For example, if your child wants to have his or her own car, he or she might need to take an after-school job or do some work-study while going to college.
Don’t forget to remind your child that there are many ways to pay for college. He or she should primarily learn the concept of budgeting.
A budget is a plan for saving and spending money. Developing a budget is essential for a healthy and happy financial life because it forces one to think about what they really want to have and devise a strategy to get there.
Another important concept of personal finance/economics related to budgeting is the principal of opportunity cost. No one has an unlimited amount of money and therefore one must make choices about how to spend their dollars.
I chose NOT to have a car for almost 10 years and I told my students that I had set a goal to own my own home. The only way I could own a home was by not paying for a car, which I calculated to be about 10 times more expensive than using public transportation. Having a car would cost me the opportunity to own my own home.
This example directly applies to a conversation all parents will likely have with their college-bound students regarding getting that first car or saving for post-secondary school tuition. Crunch the numbers; how much is coming in versus how much is going out.
What is doable given that reality and what is the top priority for the long term? As a family, have this discussion. Keep in mind the budget and the fact that every economic choice will cost an opportunity.