How have other families structured financial arrangement w/ kids?

Parents Forum
41

I believe in supporting long term outcomes over short term outcomes. This means that I support unpaid internships, volunteering, arts residencies and so on in the interest of long term career success.

This strategy worked in high school by helping my kids get scholarships (or admission to schools with great aid), and worked for grad school by securing funding. The scholarships far exceeded anything they would make working locally. I did not worry about their work ethic. (I personally think that working locally should be honored more in merit applications, as an aside.)

We avoided debt with the exception of one child who was in a lucrative field and had well-paid summer internships, and he paid off his $10k loan once he graduated. Because of his field, he was also able to contribute more to his college costs. We did not ask this of him, he just did it.

Two of my kids have serious health challenges. One took quite a bit longer than 4 years to graduate (at a top college), and would never have been able to work and do school at the same time. I paid for everything, basically, that was not covered by scholarships. I just want to introduce this kind of reality into the discussion because many on this board deal with it. (The perseverance shown by some of the kids with health issues while in college certainly makes the phrase “skin in the game” seem trivial.)

The other child w/health issues went to LAC, then community college, now LAC p/t program for working adults and works hard and long at a low level job that she takes pride in. Her entire teen age years were spent on a performing art, sometimes in elitist environments. Her work ethic is nevertheless outstanding. She tolerates a monthly amount from me but values financial autonomy, and I literally try to sneak money to her (taking her out to eat for instance.)

None of my kids learned to drive as teens. Two still don’t drive and don’t have cars. This saved money.

For various reasons (husband’s stroke) we sold our house and that has helped a lot. I continue to try to help those of my children who need help financially, and support opportunities to grow in their fields- as much as I can and when they let me! I do not worry about affecting motivation for self-support.

Overall, I like values to emerge from my children rather than force values with my own requirements. It is still a work in progress, but so far so good.

I think that for all of us, the philosophy will vary, but consistency is important. I have seen all kinds of arrangements have great results for kids when it is clear what they can expect and when they receive our emotional support at the same time. So honestly think you can probably answer your own questions since you have clearly done a good job so far.

(editing to add, however, that others with different philosophies expressed in this thread have also done a good job, and if their answers involve disagreement with your way of doing things, take it as information not argument- since you asked…)

42

We’re a one income, borderline Pell eligible family. After I finish my master’s I expect that to change, but right now that’s where we are. I don’t want my kids worrying about money in college like I did. I don’t want them giving up the opportunity to network, take part in clubs and other organizations, or give up the opportunity for summer internships to earn minimum wage flipping burgers or stocking shelves so they can afford their books or whatever the following semester.

I think my kids are responsible. I have no reservations about paying their college costs for them. I don’t think they’ll be unable to transition into self-supporting adults after college if we don’t start making them begin doing it at 18. My son works a few hours a week at his college in a job related to his major because, unlike my experience, I want him to have the opportunity to strategically build his resume. He doesn’t tell me how he spends his money and I don’t ask. He’s a saver, so I know he’s building up the money he has in his account. I’m happy with that.

I think the best way to determine what you want your child to cover is to figure out what you can afford to pay. If it’s not enough to cover costs, you don’t have many options other than the student loans and/or working. If you don’t think your daughter will take her studies seriously unless she helps pay, then I’d let her cover her living expenses. Books is a one time payment, but with incidentals she’ll have to budget throughout the year which will help keep costs down.

43

with all of our kids, the deal was we would pay for tuition and r&B, but they were responsible for personal expenses. With the first child, she chose a school closer to home and commuted, so in lieu of room and board, we bought her a safe and reliable car. She paid for all gas and maintenance. Since she had a paid internship in her field all through college and worked a lucrative summer job, she didn’t need to take any loans because she was, frankly, rolling in dough after we paid tuition and she lived at home. She graduated with a job and a downpayment for a condo, and paid for her own master’s degree while working. We think that was fair. The second D went to an expensive, out of state school, so she had to take some direct loans. She also worked during school and in the summers and earned a couple of small scholarships over the years, so when she moved off campus to a cheap hovel, we continued to finance the same dollar amount, which reduced her loans in the last two years. She went to a 90% funded master’s program with a large stipend, graduated with a job a used car that she purchased, and a downpayment for a condo out of her savings. Neither of the first two ever asked for a single dollar above the agreement from the time they graduated from college, and handled things like visits home, vacations, and holiday gifts without any effort from us.

Then the last. The king, himself. He got a large merit scholarship and would have needed less than the max direct loans. He worked a very lucrative job the last two years of high school and full time for the summer before college. Same deal, he was responsible for personal expenses. He went off to college with a couple of thousand dollars of his own in his bank account, a full meal plan, and college bucks on account. We left him alone since he had earned the money and been responsible all along. Big mistake. He blew through the entire bank account before thanksgiving and had to be bailed out. He is taking too large of a course load to work through the semester, but he will be working the lucrative job this summer. We have decided not to give him any more discretionary money. He has a meal plan, so he won’t starve, but he needs to learn the value of a dollar. It’s going to be a long semester for him. Tough.

44

@thumper1 Interesting. We had a similar approach but only with one of our kids. All 3 were able to get good merit scholarships. Child #2 was not working to full potential in HS so we did make him take the Stafford Subsidized loan his first two years to have some skin in the game. He transferred to a higher ranked/more expensive school when he figured out what he wanted to do and we paid not only for him to finish undergrad but also for his one year MA program. I paid off his loans after very successful completion of undergrad. He figured it all out in college and is now in a fully funded Ph.D. program at Princeton.

All three kids use(d) their job earnings to pay for non-academic expenses.

@garvey We also saved from birth for college. It is how we have been able to give them the gift of graduating without debt. Their job in school was/is to study hard and prepare themselves for adult life. Child #1 went into a fully funded grad program straight from college. He decided to leave after getting his MSEE and was recruited by a great company and is doing well. As mentioned above, #2 is now in a fully funded Ph.D. program. No doubts that he has a bright future. #3 is still an undergraduate so time will tell, but so far so good. He is a double major with a crushing workload. No way he could add a job to the mix during the school year. He does work during the summer. Hope this helps.

45

We expected our kids to use their summer savings to pay for their discretionary stuff. One kid is amazing at this; the other, not so much.

46

@maya54, we also didn’t believe in the skin in the game thing. Our D was salutatorian, NMF, and has a 3.9 GPA in college. But I have to say that I think we didn’t do such a good job teaching financial literacy, and I think she might be better at making a budget for herself if we’d insisted that she pay for a few essentials herself.

47

“Sanctimonious?” Because all children are different, need different incentives, and parents know what works in their particular situation? I am sure your child needs this kind of incentive. Mine need something different (and each of them needs different incentives as they are individuals with different needs and motivation). There is no call to label other posters “sanctimonious” because they disagree with you.

48

One child, had savings to send him pretty much wherever he wanted (not 529 money). Had to add $ constraints midway in senior year when husband lost his job and it was uncertain what the future held on that front. Fortunately son had applied to reasonably priced options. Ended up at the in state STEM that’s top 10 in his field, so he did fine with the constraint. He is responsible for all expenses past tuition, room, board. Worked all summers, internships from sophomore year on and worked during winter break as well. His skin in the game is to save for his “launch”, which will be in a high COL area. Knows from friends how expensive it is to start out and how important a financial cushion is from the get go. So that’s where his savings is going. He wants financial independence for himself as much as we do, of that I am certain.

From the start he has been responsible for paying ALL bills, including tuition. At beginning of the semester together we make a budget with broad categories and give him all the money for the semester up front. He has to watch due dates and make sure he stays within budget. End of semester he plugs his actual expenses into the budget spreadsheet and we make adjustments for the next semester as needed (food and utilities have needed adjustment on occasion). He also has a credit card in his own name and sees how much little purchases mount up on a monthly basis. So he’s VERY aware of how much everything costs and imho is learning a lesson similar to what parents expect “skin in the game” to accomplish.

He’s graduating late this year (already has 1 offer) so ask me in another 18 months how the actual launch went lol.

49

@compmom, and yes, our D"s health issues were one reason we went easier on her. She really couldn’t manage a job while in school until this year, and even that is only a few hours a week. But I still think we didn’t do such a good job teaching our kids how to live within their means. I don’t regret being full pay, but I do think we have blurred the lines between our financial responsibility and theirs, and now we’re playing catch up. On the flip side, our D has applied to a graduate program that requires every student to fill out the FAFSA, and she actually enjoyed doing it.

50

I was almost 40 and got a little help from parents when buying a house : )

In this day and age, it can be tough to launch and I don’t think it is a moral issue when they have trouble. In fact, I have seen countless kids return home (82% come home after graduation), endure a period of being “lost”, and then in a year move out with a job they can function with.

Massmomm, I hear you about the blurriness, but it sounds like it is happening in good time with your daughter taking on responsibility naturally. Congrats! My three are doing okay, knock on wood!

51

We were very upfront with our son that we would only be able to contribute $30-$35K per year for a total of $120 to 140K. We have a second one coming so need to tow the line. the second one gets more due to expected tuition increases. This total will include books, computer, and any other unknown costs that crop up. It also needs to handle expected $3-4K annual tuition increases. We had this talk before he applied and made sure to include a financial safety and a financial reach. As with all Americans, his top choice is the most expensive. Hahaha As @thumper1 mentioned, if he lost his scholarship for whatever reason, he was gone. Money is finite and once it is gone, it is gone. He would not be able to stay at the expensive school. We counseled him that if he pushes the envelope he would have to ensure he finishes in four years. On the flip side, if he accepted a cheaper option (state school) he most likely would have some cash left over for grad school.

Studying abroad is fine if the costs are similar but spring break vacations are out. Spending money is on him and we will be encouraging him to work part time.

these are huge decisions for an 18 year old with no real world experience. We as parents advise him based on sound financial principles and explain pitfalls to various scenarios. We are open and honest with him and provide him with all the data he needs to know the consequences. He will have to learn to live with his choices. We absolutely will NOT allow him to take more than the fed loan limit for undergrad. That would increase the financial risk to him beyond what we as parents are comfortable with. We will ensure that a workable four year plan in locked down prior to enrollment otherwise the deal does not get done.

In the end we all need to be honest with our children and approach the college selection process accordingly. We have always explained to our children that it is different for the kings and queens of society. they were not born with a silver spoon and they need to get over it and concentrate on working with what God gave them.

52

I want to emphasize something EMPHASIZE it.

We did NOT have our kids take the loans so they would have “skin in the game”. Their skin in the game was doing well enough in college to maintain their scholarships. That was IT.

We had them take the loans because it eased OUR cash flow while they were in college. We always intended to pay the loans off ourselves. Always.

Honestly, having “skin in the game” does NOT have to be with monetary contributions. We expected our kids to maintain a 3.0 GPA because that is what their colleges required tommaintain their merit awards…and tomgraduate in four years. THAT was their skin in the game…not any monetary contribution.

We asked them to pay for their own discretionary spending in college…but really…they did that in HS too.

53

Like Thumper and Garland, we covered essentially all costs for room, board, and tuition. No loans. The kids worked in summers and part-time during the school year to cover books, supplies, and incidentals. The supplies aspect was more difficult for our #2, b/c art materials were very expensive. So we relaxed the rules for her.

A key rule was this: graduate in 4 years. Got out daughter, this turned out to be 4 years + summer, owing to the fact that one of her best friends died in an accident in her senior year – and my daughter helped to organize a memorial event for the class.

54

Beware of perverse incentives.

It’s great to teach your kids the value of a buck; skin in the game, whatever you want to call it.

But I have friends who live large yet insist on their kids taking loans, working a pretty hefty number of hours during the college years, paying for ANYTHING not tuition or room/board on their own.

What is a perverse incentive? Kid number 1 bought all her books used and online. Had to withdraw from one class because she was so far behind once the textbooks arrived that she couldn’t credibly take the midterm. So she saved her parents $500 on books and will need a summer class (many thousands of dollars) to play catch up. Kid number 2 did not have any extra time in his schedule to work with a professor who approached him about a research opportunity. (Kid was a very solid, academic kid- but when you are working foodservice you are not simultaneously sitting in a lab with your professor and a few grad students learning how to replicate the genome of a mouse). So for the extra $800 bucks or so he’s earned by doubling up on his hours at work he has sacrificed an opportunity for solid intellectual and professional advancement.

Kids who have no parental backstop financially? Of course- you sacrifice to pay the bills. No judgment. But for parents who can easily afford book money, lab fees, etc. to incent their kids to underperform academically? Not sure I get it.

But to each his own.

55

OP, I can see my previous post was pretty unclear. Here’s how we structure it:

COA: [ul]
[]Tuition & Fees
[]Room & Board
[]Books & Supplies (est.)
[]Transportation (est.)
[li]Personal Expenses (est.)[/li][/ul]

We will pay the above, up to our budget. She covers the rest through student loan, working, and/or savings. If there is a gap, then she cannot afford to go to the school. If she goes to spring break and it is above ‘Personal Expenses’ amount, she pays.

56

Blossom, your example about the lab research opportunity in post #53 is exactly the kind of thing I was referring to, but you did it much more concisely and specifically : )

57

OP here. Again, I so appreciate reading of the variety of people’s approaches to this aspect of preparing kids for next steps. To be clear, we have no expectation that our child should take on debt (in fact, we would not permit her to do so) in order to attend college. We are prepared (have saved since she was an infant) to pay for her room, board, and tuition up to the amount associated with what these costs would be at our expensive, flagship state school.

She would only have the option of attending a more expensive school if between what the school were to give her in merit aid and her own savings she could make up the difference. She has been accepted at six of six schools to which she applied EA, and has been awarded merit aid at 4 of the 6 from which she has heard thus far. Still waiting to hear whether anything will be offered by her first choice.

We are trying to figure out what is a reasonable expectation for what she might contribute toward her costs. We are not looking to “teach her a lesson,” but rather, to support her continued growth in all areas of her life. She is a bright, conscientious, hardworking kid. I especially appreciated some of the posts upthread that refer to the importance of financial literacy. Because our daughter has worked throughout high school, she has been in the (enviable) position of having lots of cash with no real expenses. Thus, she has had the luxury of being able to afford all kinds of things throughout high school that would give one pause if there were a concern around having resources enough to cover the costs associated with meeting more basic needs. It wouldn’t be the worst thing in the world if part of what the next years afford her is a shift in her “paradigm”, i.e., think hard about whether it makes sense to spend money on expensive restaurant meals, mani/pedis, etc when those same funds might be better put toward other kinds of expenses.

58

For our kids, we would have paid instate tuition, fees, room and board, and books. They are responsible for all personal expenses. They would have been responsible for all costs above instate tuition. We weren’t trying to teach a lesson, we just could not afford more and still ever retire. Both kids found great merit awards - full tuition and full ride. Even with the full tuition, we have paid $50,000 for the room and board. We are paying our youngest the same over 4 years and she is learning to save the vast majority of it. I do check her bank account. She will have a nice nest egg for graduate school, car or house after she graduates. Both kids have worked since they were 15 and have worked every summer. They are not expected to work during the school year. I do think it is important that they know how to manage money before they graduate and start making the big bucks (we hope).

59

@garvey

You know…really, this is a personal family decision. Your family needs to do what works for you.

60

I think expecting kids to work and contribute toward personal expenses is reasonable. While my college aged kids are generally responsible, they are still adolescents. My 19.5 year old son would try and get away with not having a job if we’d allow it. His default is lazy, he likes naps and video games when he’s not doing his schoolwork. He’s also a gym rat and health fanatic with a penchant for organic meats and produce… he needs to fund some of his costs and learn how to manage his finances. $12 a pound organic sirloin is lovely, but college kids can’t afford that. My 17 year old daughter is more academic and very responsible. Give her mom’s credit card though and she’s getting Starbucks everyday and overdoing the shopping. That latte will be worth more to her if she had to earn the money to pay for it, as will the new jeans.