Leaving Home 101 – Launching Money Smart Kids

My five-year-old son, Jonathan, was very mad and having a horrible, no good, very bad day. His three-year-old brother, Joshua, had taken all his favorite GI Joes and threw them in the toilet—again.
“I haffa tell ya’ mama,” He announced when he came into the kitchen where I was mixing a batch of brownies, “I’m gonna’ run away.”
Gazing at his determined face, I leaned down and met his eyes, “Well, we’re going to miss you around here, son. Let me at least pack you a lunch before you go.”
As a veteran mom of many, I knew Jonathan’s terrible, no good, very bad day would pass and that he was probably just going to his friend’s house to play. I asked his older brother, Daniel, to get on his bike and follow his younger brother to make sure he would only go as far as the Maerten’s house.
I dialed Leanne Maertens number, “Hey Leanne, is Jonathan there yet?”
I heard her doorbell ring, “Yes, I think he’s at the door now.”
“Well, he’s run away from home and I figure he’ll hang out until dinner. Let me know when he leaves.”
Fast forward a few years and Jonathan’s left home again—for good. He’s earned a $435,000 scholarship to The United States Air Force Academy. He learned that there’s a good way to leave home and a not-so-good way to leave. Here are the things parents can make sure their children know in order to leave home well.

Budget Babies
Before your child leaves make sure that you help them establish a workable budget. Go to my tools page at www.elliekay.com . The categories should include housing, transportation, clothing, food, entertainment, and (if necessary) tuition and books. Decide, up front, what they will pay for from their own work money and what you will cover. Ask them to send you a monthly budget report and review it with them. Look at this as an opportunity to coach them in right choices but beware of funding their failures by bailing them out on a regular basis. This is the time for them to learn to live on their own in a healthy way. A great resource is www.MoneyTrail.net , a free, online allowance and money management system for kids, teens and families. Kids & teens track their allowances, IOUs, cash and gift cards. They learn to make smart saving and spending decisions, too.

Bucks and Money Cards
Your college bound student will need banking accounts for checking and savings. Research banks (or savings and loans) that offer student banking programs. In our family, we like to get money cards like the American Express prepaid credit card that is safer than cash, do not require a credit check and are easily reloaded. With this money card, our college kids have the benefits of a debit or credit card without the liability or temptation to get into debt. They are convenient, safe and efficient—plus we can reload funds onto their cards either online or at our local store.
Now is also the time to educate your child on the dangers of easy credit. Direct them to order their free annual report from each of the three major credit reporting bureaus to make sure no one has stolen their identity.
Help your children set up their own credit card through your own credit card company with an “additional card” where you are the gatekeeper. You can set up credit limits and turn off ATM use as well. As they charge items that you were planning on pay for (such as books, rent, food) then pay off the balance each month, they’ll build their own credit score as well. Our son, Daniel, as a senior in college built enough good credit to prequalify for a townhouse! It all started with our involved effort to help him establish and build credit wisely—without getting into debt.

Borrowing and Student Loans

Parents often ask, “How do we pay for college, should we get a HELOC or a second mortgage?” I do not believe you should leverage the equity in your home (which is part of your future retirement) in order to pay for your child’s future. HELOCs (Home Equity Lines of Credit) are also a poor choice. Instead, look at a variety of scholarships, work study programs, and other options available through the financial aid office at the school. Another financially healthy option is to have your child attend a college you can afford. Our mantra for our college bound kids is: I will go to the school where I can get the best education possible for the least amount of student loan debt.
My oldest step-daughter took a year off school between her sophomore and junior years at Columbia University in order to work to help pay for college. Some employers will help pay for college as well. Exhaust all your options and think outside the box in order to minimize college debt. If you must subsidize tuition through student loans, then make sure the loans are in your student’s name and that they do not exceed $20,000 by the time they graduate from a four year college. Email assistant@elliekay.com and ask for the “College Crunch” file for dozens of great ways to get through college debt free!

Bagels and Broccoli
My daughter, Bethany, was graduating from high school and I decided to let her do our grocery shopping in order to teach her how to shop wisely when she was on her own at college. When she got the the bakery department, she exclaimed: “Wow! I can get this bag of eight bagels for less than this other bag with only six!” She was so proud (and so was I!)
Be sure your kids know how to price compare and how to read the store labels as well. Show them the “price per ounce” on the shelf so that they can recognize value. Walk them through the frozen foods section to compare the difference between buying fresh broccoli versus frozen and let them see the savings in frozen convenience foods versus fast food pizza. We also teach them to use www.couponmom.com in order to match up coupons with local sales in order to get items for pennies or for free.

Launching a child in leaving home can be costly and stressful unless you are strategic and purposeful in your planning. With the right moves, you can help your student finish well at home and start their new life with a healthy financial perspective.

Ellie Kay
America’s Family Financial Expert (R)

2 Comments
  1. Pam Whitlock 6 years ago

    Wow — that was quite a scholarship for your son. I am sure you must be one proud Mom! I have four kids and the oldest is 17. We are just starting to look at colleges and talk about leaving home. It's a whole new world!

    I recently read your book "Money Doesn't Grow on Trees" and really found it to be a great resource. My favorite quote was "Your values are more likely to be caught by your kids as they watch your behavior than taught by endless lectures." So true!

    Thanks so much for the "shout out" about MoneyTrail. I hope your readers find us to be a helpful resource, too.

    Pam Whitlock
    Owner, MoneyTrail.net

  2. Georgia P 6 years ago

    It sounds like the best advice is to start teaching kids about financial responsibility early — such as banking, shopping and budgeting their allowances or salaries from babysitting or part-time jobs. Waiting until just before they head off to their first student apartment or dorm is probably too late.

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