<p>In our family, me and my wife have been transparent about the family financials with the children. Now that our twins are HS juniors, they have full access to spreadsheets and our calculation on retirement, income, taxes etc. Earlier this year we took them to "assist" us filling for IRS, so that they could gain some practical knowledge as well. Now they handle complex math well, so we put them to make some mortgage calculations, simple ones, so they are already training for evaluating their financial packages next year.</p>
<p>We shared the procedure, though not the numbers, with some family friends, and we got a little backlash from two couples who think we are putting too much pressure on our kids, and that it should be the role of parents, not kids, to work out the financial complexities of college funding, at least as federal aid, COA, ECF go, informing but not letting the children take the lead on the exploration of numbers. A third couple said they would appreciate if they could do that, but her daughter would probably stress out and lose focus.</p>
<p>I think our approach would make easier for our kids to not start dreaming of schools as if they were free to begin with, and if they somehow get accepted at a dream place with unaffordable conditions, they will at least understand why we can't support them there. </p>
<p>How did/does the process go in your family with your college-bound child(ren)?</p>
<p>A lot of people give their kids a dollar amount to work with for undergrad. Or offer them a deal that if they stay within a certain dollar amount for undergrad, the parents will help with grad school. Some kids HAVE to know their parents’ asset and tax return situations because the parents just have the kids take care of all the FA paperwork. I don’t think any one way is better than another as long as the kids have an idea what the financial realities are for their college expenses before putting in applications. </p>
<p>Although Happykid knew the parameters she needed to work with for paying for college, I now wish I’d spent more time earlier on with larger financial issues such as the ones you have been sharing with your kids. I’ve been the manager for the family, and if anything happens to me, Happykid and Happydad will be seriously challenged to cope with the money issues. At tax time, they both like to look at the paperwork, give me a sad face, and say “That’s a lot of numbers.” Happykid is now out of college and in a career where much of her income comes from self-employment so she’s having to catch up on learning how to keep good records (thank heaven she’s fairly detail oriented) that indicate where she worked, when, and any expenses or miles that can be attributed to that gig. She’s also juggling her own living expenses, and the learning curve is pretty steep.</p>
<p>I think that you are doing great! Your kids are going to be prepared for a lot more than just choosing wisely about college expenses. They are going to be ready to set up budgets for the rest of their lives. Keep it up, and ignore the haters.</p>
<p>Student here, speaking from my experience growing up. </p>
<p>My parents were always transparent with our financial situation. Financial literacy was pounded into me from a young age and my dad liked to show me how he paid bills and did taxes. It was less about showing me our situation and more about encouraging me to develop math skills. My mom, a banker, did similar things. </p>
<p>My situation is unique in that we had no money for my college. In fact, I helped (and help) support my parents as a student. I knew this from early on so I didn’t have unrealistic expectations. </p>
<p>I think your approach is great. There is too much financial illiteracy in this country and your kids are going to be way ahead of the pack. </p>
<p>Depending upon your kid, and your attitude when presenting the financials, I think inviting teens into the nitty gritty of complex family financials can be overwhelming. Sort of like tossing a child who can’t swim into the deep-end. Rather, I started mine with a debit card and weekly allowance in High School, gradually the allowance included budget items for “necessities” (like clothing and comestics). That way they saw first hand the real cost-of-living and what type of monthly expenses they would incur at school. </p>
<p>My situation is similar to Romani’s. Starting around ninth grade, my parents let me know that they had no money for college, and I should assume I’d be paying every dime of tuition with either scholarships or loans. I appreciate that they were direct and honest with me about their finances, and it definitely gave me plenty of motivation to work hard in high school.</p>
<p>I think it really depends on the individual situation. I’m a single parent and did not share that info with my kids, in part because I didn’t want to put them in the middle of a sometimes stressful situation because of their father’s habitual delay with paying child support. On the other end of the spectrum, I think that kids may have an unrealistic picture as to the parent’s expenses and concerns like saving for retirement, so they could draw the wrong conclusion about availability of money to pay for college if, for example, they learned that their parents had $50K in savings. That is, some kids might have a hard time understanding why the parents aren’t willing to part with all of that for year #1 at NYU. </p>
<p>Additionally, I really didn’t know what the colleges were going to expect us to pay – I knew I’d have to take loans myself, and well before my son started college I focused on making sure that I would have the capacity to borrow – for example, I got a HELOC and I worked to clean up a ding on my credit standing in the way of a PLUS loan – but there are a lot of factors beyond mere “afford” that go into the decision to borrow. </p>
<p>So I told my kids that no matter what, I’d pay for them to attend our state U., but that private colleges depended on financial aid. When the aid awards came in, I put the numbers on a spread sheet and made bar charts so it was very easy to compare the costs for each college – there was wide variation in awards and costs, and because of that it was easy to see which colleges would be dropped from the list for financial reasons - the kids didn’t need to know my bank account balance to appreciate that I could manage $15K but not $30K. </p>
<p>I do think it’s important to build financial literacy for teenagers, but it doesn’t necessarily have to be done with the family tax returns and the FAFSA. But again, it depends on individual circumstances. </p>
<p>Not at all really other than to have to say “No, we can’t afford XXX” more times than I wished I had to. Once D started her college list last winter we talked alot about how much I could afford, how much she can afford, what I’ll allow for student loan debt, and how we were going to meet the tuition obligations. She is aware now that I’ve been putting money in a 529 for a few years and that I’m downgrading from my new 2013 Crosstour to a 2001 Jeep to save $5000/year between car payments and insurance which will go directly into college expenses. Other than that, I don’t think my financial situation is her business. </p>
<p>^^^ exactly! Letting the kids know up front, how much money you are willing to pay out of pocket, what you consider reasonable in terms of loans, and what you expect them to contribute (summer job /work study / student loan) is critical. We also put all the schools on spread sheet and factored in hidden expense like plane tickets and winter clothing, as well as projected costs if school did not guarentee housing for four years. My kids have “skin in the game” which translates to 5k per year – a combo of loans, summer emplyment and work study. </p>
<p>I’d add that it probably depends on how complex the parents’ financial situation is. I’m self-employed, so that makes my finances more complicated. Not only is income more variable, but also over the years I’ve got the added burden of paying self-employment tax and health insurance costs – so if I “make” $50K at my job it’s not the same number as someone who is paid a $50K salary at a job with benefits. Plus more uncertainty also means a need to maintain more of a financial cushion – during good times it’s important to put some of the extra money in savings to carry through the times when business is slow. </p>
<p>I think I might have felt differently if I could have simply showed my kids what my salary was – that is, I don’t think I would had any reservations to saying (for example)-- “My salary is $X, but after withholding, I take home $Y”)</p>
<p>We felt the kids didn’t need nor did they have the sophistication to understand the details of our finances. We did, however, give them an amount we could afford for college. We actually gave them a fairly tight range and explained the differences that even $5000 would make to the entire family. Fortunately all three kids worked in high school for there spending money so had a vague idea of how much money goes to taxes, gas, day to day life. Doubly fortunate, our spend-o kid is now the best saver post college. </p>
<p>Told them I could pay a total of X. They could divide by 4. Come in under budget and there’s money for summer school, a bottom of the line car, etc (we’re not talking about an amount significant enough for an unfunded grad program). They had jobs by age 16 and so had to budget their own gas and expenses. </p>
<p>I think there are some things that kids really can’t understand, like that $50k in savings doesn’t mean that’s available for them, that there are some items that aren’t for them to decide (donations to charities, vacations, payments for other kids). Both of my kids were told how much I would pay and that I didn’t want them to take out loans. One came in way under budget and I know she’s mad that I pay more for the other child. I don’t want her knowing how much more as I don’t want to pit them against each other. She doesn’t get to have that extra money as ‘hers’ because it really isn’t hers, it’s mine. If it’s still there when I die, she can have it. Most likely it will be spent during her college years and her sister, who is over budget will have to borrow some for later years.</p>
<p>Mine handle their own budgets (spending money, earnings, books) but I handle my budget. I help them with their taxes, but even though mine aren’t complicated, they haven’t been interested. When I mentioned that there was a tax credit for college, DD#2’s eyes lit up and then she was crushed when I said it was MY credit, since I’d paid the tuition. Oh.</p>
<p>So, to the OP, yes I think there are some kids who can’t handle all that info, and others who will see the piles of money you have and disagree with how you are spending ‘their’ money. Many young people don’t save because they think they can just make more money. Most of us who are older know it’s not that easy.</p>
<p>We also told S he had stay within a certain dollar amount per year. Not that we want to hide our financials but didn’t give him the full numbers. Did have to explain that while the government and universities have decided the amounts we are capable of affording that doesn’t necessarily mean that is what we are willing to pay (as they have no idea the extended family we will need to support in the future and don’t account for that and we like to have a bigger cushion as we are risk averse). </p>
<p>I haven’t started on this yet with DD16, but I will make it all open to her because she’s an only child with no relations other than us, really. She needs to understand all this as our only heir and future POA. Also, since she’s going into a infamously low-paying field, she/we need to plan for as low debt for her college education as possible, while she must also figure out a way to eventually have a decent income long-term. She needs to look into some college-debt forgiveness programs for grads who enter NFP work. To me, it’s a kind of multi-generational personal financial planning that we’re about to launch. Probably will ease her into it in the new year, our FASFA base year. </p>
<p>I didn’t share as much detailed info as I would’ve liked with my sons because there was an ex-husband in the picture. However, we did work very hard to model and push frugality. I’m really happy that at 23 and 25, they seemed to have absorbed the lessons well. I’ve done the same with D, in even greater detail. She is very aware of finances, calculation of net college cost, insurance deductibles and reimbursement, etc. Financial literacy has always been a big goal of mine for my children. I’m a strong believer making the right choices and working hard between 18-30 pays off very well in the 40’s and beyond.</p>
<p>In most cases, they have never had control of anything more than a few hundred dollars at a time – or perhaps a few thousand if they had part-time jobs. The amounts of money that parents handle seem enormous to them.</p>
<p>We told the kids that money for college wasn’t an issue for us. We haven’t given them all our financials but we did show them their 529 plans. My older daughter said "Ohhhh so this is why we don’t take vacations like [ her best friend] or have as big a house as her or as a nice cars as her parents. She has to get money or she can’t go to her dream school and she still has to have loans too. " </p>
<p>We have told our kids how much money we make. We both work in the public sector so our salaries are public record. Salaries are only part of the overall picture of finances, however. We have told them how much (roughly) is in their 529 accounts. We have shared generalities about other aspects of our finances, but not a lot of detail–although we have not refused to answer any specific questions.</p>
<p>The deal is that any college that is within the limit of the 529 amount is a viable option. The accounts will cover an instate public, including housing. We have told them that costs above the 529 amounts may be an option, if we think it is a better fit, if their HS performance has shown they are dedicated students, etc. We have also told them that if they get through undergrad without using up the 529’s they can have that money for graduate/professional school–but otherwise they are on their own for post-graduate studies.</p>
<p>We have given our boys (senior twin boys in HS) a range of what we make, but it’s a wide range. Also, they are not mathematically inclined, so getting real specific about the how to calculate a mortgage payment, spreadsheets, etc, will go in one ear and out the other. I also believe that kids tend to accelerate their learning about money, etc, after college starts, and especially when they move out of the dorms. Right now, ours have a bank account, debit card, make their own deposits and withdrawals, and decide when to spend their own money. That’s about all they can do right now. </p>
<p>Most high schools have consumer ec, where they learn costs of things, basic budgeting techniques, etc. This has helped some, and we will work in other details over the next 2-3 years.</p>