Disturbing financial statistics

[MrsPete]

(Course, nowadays you can't get cold medicine at Target easily for fear someone will turn it into crystal meth - I can't imagine a college handing it out!).

Wow. That hadn't crossed my mind! It certainly wasn't a problem when I was in college!

 

[MrsPete]

Exactly! I want her stressed over Biochem or Economics or whatever. I don't want her stressed about how she's going to afford books or food.

I'd like my kids to graduate from college well-versed in both the subject matter of their choice AND budgeting. If we give them everything they want, they won't learn the budgeting skills.

I'm not advocating allowing college students to starve, or that they should work so many hours that their studies suffer; however, I think that if parents are paying for tuition, books, dorm, and meal plan, then the kids can work a few hours a week for pizza /movie money -- those aren't needs.

 

[MrsPete]

Yeah, that's what I thought when I got my card. I'll pay it off when I graduate. Right. I ended up in a minimum wage job, then a part time minimum wage job on top of a full time not much better than minimum wage clerical job. Not what I went to college for.

I suspect this is not a rare experience. And once you've used credit cards to "stay afloat" once, it's so easy to reach for them again. I'd rather my kids never rely upon them. Use them as a tool, use them to build up reward points, but don't ever depend upon them.

 

[DisneyElf]

Trying to figure in where I stand in terms of financial stability --- YIKES...

Hmmm... 46 yrs old - co-own a house with my Sister (6 yrs now)... We have equity in it (though we did a small equity loan to renovate the kitchen (the floor needs to be replaced). We still have money in our savings account to pay for the new roof ($5800) from the re-financing 2 years ago (got the interest rate down to 5.58). Personal savings - I stink at that -- BUT I do have 3 retirement accounts. Largest one is from a p/t job that I just left - after 16 yrs. - keeping it with Putnam as as 401K still, Middle one is from an old job I left 6 years ago - JP Morgan manages that one as an IRA, the smallest is from my current job and is handled as a 401K by ING. Total in savings is over $ 120,000 -- and have approx 20 yrs to continue to grow.

CC debt - a little -- nowhere near the "averages" .

I like to vacation -- went on the Eastbound Repo - and paid CASH for it. Part of me believes in the live for today -- esp. since both my parents died young.

So.... how do I rate ?

 

[can'twait]

I suspect this is not a rare experience. And once you've used credit cards to "stay afloat" once, it's so easy to reach for them again. I'd rather my kids never rely upon them. Use them as a tool, use them to build up reward points, but don't ever depend upon them.

I agree! They are EVIL, I tell you!!!!!!!!!

 

[dcfromva]

I think being forced to live within your means (whether that means mom/dad's allowance or your own paycheck) is a good thing to learn in college; being able to fall back on a credit card teaches an entirely different lesson -- it teaches that if you need new tennis shoes, you can pay them off over the course of a couple months.

MrsPete,
I don't see the purpose of the line of credit to pay it off over two months, it should be paid off when the bill comes in (just like the old American Express cards--the ones you have to pay off each month). Paying interest is never a good deal. Hopefully, this should be learned from day one from using the card.
I think you could accomplish the same thing with a debit card, but I just like the safety cushion (the grace period) the CC offers.


-DC

 

[MrsPete]

I don't want anyone to think that my children's education suffered because they worked 12 hours a week. The first one off to college did that on the advice of the college, when we went for orientation, and for our family and kids, it was perfect, and it was continued with the others. They had their own spending money and didn't have to call home for money in order to take a date out, or go to the movies. And while we could have paid for their education in total, we appreciated the hard work they did to get scholarships, and in our opinion, took great pride in footing half their bill. They tell me now that that is how they'll do it with their own children. No one suffered, all had excellent grades, all at the top of their classes, and one graduated as an RN with a 4.0 (and the other's weren't far behind), and all have high paying, well liked jobs. They all think they worked harder, since they had their own money invested. Not that a child won't work hard with no money invested, but for my kids, that played a part. We also only covered them for four years. Our son thought it might take him 5, but once he realized we were only paying half for 4, he thought 4 years was a nice amount of time to graduate in LOL.

This is basically what we're thinking too. We have been saving since before our kids were conceived, and we expect to pay the following:

In-state tuition at a state university (we live in a state with a wonderful public school system and 16 schools from which to choose) for 4 years. If they happen to choose a major that literally can't be finished in 4 years (for example, architecture is now a 5-year degree, and nurses are required to do summer school before their junior year), then we'll pay for that expense too. We'll also pay any fees attached to their tuition /classes. But we won't foot the bill while they earn 4-year degrees on the 8-year plan. If they choose a private school, we'll still pay the portion that would've gone to a state school; they can make up the difference with scholarships /loans. If they get full-ride scholarships (a very real possibility for our oldest), then I'd figure out something to do as a financial reward -- perhaps a car, perhaps X amount for spending money (negating the need for a job), perhaps an IRA -- but we've saved that money for the kids, and we'd do something for them with it.

We'll pay for a dorm room or suite, depending upon what's available at the college of their choice. After their freshman year, if they want to live in an apartment, we'll give them the cost of a dorm room to apply towards rent /utilities, and they will have to make up the rest through their own efforts. We'll also pay for a meal plan so we'll know that they'll never go hungry.

We may or may not provide a car during their college years. If they choose to live on campus, they won't need a car. If they choose to live at home and attend the state school 20 minutes down the road, the dorm-room money will go towards transportation instead. If I had to guess right now, I'd guess that one of my daughters will "go away" to school and the other will live at home and commute.

We'll give them each a nice, new laptop as a high school graduation present -- it's a need these days. We'll continue to keep a cell phone for them on our contract during their college years (that only makes sense -- an extra line for us is only $10/month, much less than them getting a whole new contract). And we'll continue to carry them on our health insurance, and we'll pay for things like glasses and dental appointments. I'd take them on a back-to-school shopping trip in August to pick up jeans, tennis shoes, and notebooks. I'd make sure to tuck some computer disks into the Christmas stocking to refurbish those things mid-way through the school year.

That covers all the BASICS. Beyond that, I'd expect them to work a few hours per week for spending money. I'd expect them to pay for meals out with friends, new outfits for a dance, etc. If they have to do without these things, it's not the end of the world -- they'll have all their needs covered.

Unless they make some terrible mistakes, they should be able to graduate debt-free.

Obviously, all this is based upon GOOD GRADES. If one of our girls goes away to school and brings home a first report card full of Ds and Fs, then the deal is off. If that should happen, we'd investigate the possibility of transfering to the local community college or that afore-mentioned state school 20-minutes from home.

 

[MrsPete]

I can honestly say I didn't encounter unexpected expenses in college either. Sometimes I ran low on $, but that was b/c I had eaten out or gone to the mall!

Ditto!

As far as the medical expenses go, the college health services still treat them without asking for any $ from the student, just as they did when I was in school. The difference is that a bill is sent to the student's account. At our house, that means I write a check to the university a couple months later, meaning this was not a financial emergency at all for my son.

That's good to know. In a few years, I'll make sure I understand whatever system is in place before my girls go away to school. I wouldn't allow them to go without medical care -- that's not my argument at all! -- but I would allow them to go without seeing a movie or having a new pair of heels.

 

[disneysteve]

I'm not advocating allowing college students to starve, or that they should work so many hours that their studies suffer; however, I think that if parents are paying for tuition, books, dorm, and meal plan, then the kids can work a few hours a week for pizza /movie money -- those aren't needs.

I tend to disagree with your last sentence. There is more to college life than studying. I think socializing, attending dances, going out with friends, etc. is all part of the experience and I'm willing to provide for a reasonable amount of that. DD gets an allowance now, and will probably continue to get one then, and she'll need to budget how she spends that money. I'm certainly not going to send her off with a blank check or a CC with a big credit limit. There will definitely be limitations, and if she wants more she can work for it. But I'm not going to say, "I'll pay for school and you pay for everything else." I agree that for those 4 years (hopefully 4), school is her job.

I think the 12 hours/week job mentioned earlier is perfect. Long enough to learn some responsibility and pick up some extra spending money but short enough to not interfere with school too much.

MrsPete - I think you and I agree and are just debating the specifics of how we would each handle things. There isn't one right way as everyone's circumstances, and everyone's kids, are a little different.

 

[crisi]

I had unexpected expenses in college, but I lived off campus, had a car, worked 20 hours a week plus - even bought a home while I was still a college student. That makes for unexpected expenses! Plus I had some opportunities - like a summer in Europe - that created some expenses I wouldn't have anticipated as a college freshman.

I think I graduated with less than $500 in debt though. My Dad paid for my in-state tuition, I paid all living expenses, the last year I had a scholarship for "student leadership." But that was 1988. College - and life - has gotten a lot more expensive.

 

[dcfromva]

I think you could accomplish the same thing with a debit card, but I just like the safety cushion (the grace period) the CC offers.

(I'm quoting myself ) I thought I would explain what I meant by this. Some items such as books will be a qualified 529 account expense. As far as I can tell, those funds should not be drawn out of the 529 account until you actually have the invoice, so that you don't accidentally take out too much and you then incur negative tax consequences. The requests take time to process.

Also, in the case of having to file a health claims, that takes time to get the money from the ins.-- so, that is why I think the CC grace period is a good thing.

If it ends up taking too long, it would have to be covered by the cushion one would keep on hand for such things... But, I was thinking why not use the CC companies money instead of mine if at all possible?

-DC

 

[NMW]

I saw an episode of "60 Minutes" attributing credit card debt to several suicides amoung college students who just felt overwhelmed and left notes behind stating that, most of these young people had debt less than $5,000.00. I think it's sad that colleges allow credit card companies to openly solict thier students. So not only do the students graduate with student loans but with credit card debt....sad! I think as parents it is our responsibilty to teach our children self control and patience and maybe they'll be in a better place than thier parents!! Finances were "none of my business" when I was growing up, so by the time I was on my own, I didn't have a clue about saving or spending or comparison shopping, ect. I'm still learning, thanks to threads like this one and many financial planning books including Dave Ramsey. I plan to be very open and involve my Dks as they grow and hopefully they won't make the same mistakes I have made! It's never too late to make a change.

I agree with you about the college thing. I graduated in 1994 and credit card companies were always outside our student union and school store trying to get kids to sign up. They also gave things to you if you filled out the application. The day I filled out my Macy's application they were giving out free umbrellas (it was raining and I still had 2 more classes to go to). the day I got my Discover card, they were handing out $2 in cash to every student who filled out an application. The day I got my Sears card they were giving out insulated water bottles and you could choose a bottle of water or juice to fill in it. I thought nothing of this at the time, but now as a parent, I'd be annoyed if that happened to my kids and they filled out the applications for the free stuff. BTW, I also got a visa in college and each of the 4 cards had $1000 limit. I was a student with no job-that could have been $4000 in debt if I had used it all.

 

[dcfromva]

I think a college student should have enough (whether it's coming from mom/dad or whether it's from a job) that they can pay for small treats, but they'd have to save for large treats.

MrsPete,
It sounds like you have a pretty generous college plan for your children. I do not think that is unreasonable to expect the kids to save for the larger discretionary type things. (When DS was about 8 or 9, he asked if the college funding would extend to such things as dinner parties for his friends...I'm not sure where that came from, but we told him, "NO!" )

-DC

 

[HaleyB]

I have a question. Do any of you know if it is still true that your credit score will be lower if you have no credit history at all? My son is away at college and he has a cc, but it is our account. When I was 18 my Dad had me open a card in my own name so that I would have a credit history. He also said to use it every now and then and then to pay it off right away. Is this still a good plan?

I have no worries about my son having a card. He is very good with money. He likes to keep it

 

[HaleyB]

(When DS was about 8 or 9, he asked if the college funding would extend to such things as dinner parties for his friends...I'm not sure where that came from, but we told him, "NO!" )

-DC

That sounds like something my younger son would say.

 

[TNKBELL]

I have a question. Do any of you know if it is still true that your credit score will be lower if you have no credit history at all? My son is away at college and he has a cc, but it is our account. When I was 18 my Dad had me open a card in my own name so that I would have a credit history. He also said to use it every now and then and then to pay it off right away. Is this still a good plan?

I have no worries about my son having a card. He is very good with money. He likes to keep it

About 5 years ago a friend of mine who was very young, 18 and married purchased a house with her Dh with no credit history at all, they went through a mortgage company which are not as strict as banks. They even qualified for 1st time homeowners benefits as well. As far as thier credit scores, I don't know, but it was high enough to purchase a home. Sorry I couldn't give you a better answer, but if it were my Dks I would much rather them not have a cc at a young age. I was told the same by my parents too.

 

[crazelion]

I think I was getting the median income for a 4 person household from here:

http://www.census.gov/hhes/income/4person.html, but I could be being sloppy.


Median does tend to be a better descriptor, it depends on the shape of the data. Mean is great for a good normal bell curve.

For instance, you have ten people in your group of friends, two are unemployed and one is wealthy, their incomes are:

$0, $0, $26,986, $32,478, $52,784, $58,962, $62,986, $76,900, $85,300, and $2,340,000

The modal income is 0 - i.e. more people make nothing than anything else. The mean income is $273,639 - that buddy of yours that ended up an investment banker really skews things. The median income is $55,873 (the mean of the two numbers in the middle, since its an even number of data points).

Runs hides in corner. You is talking Statstics now I hate that class in college.

 

[mickeyfan2]

I have a question. Do any of you know if it is still true that your credit score will be lower if you have no credit history at all? My son is away at college and he has a cc, but it is our account. When I was 18 my Dad had me open a card in my own name so that I would have a credit history. He also said to use it every now and then and then to pay it off right away. Is this still a good plan?

I have no worries about my son having a card. He is very good with money. He likes to keep it

When I went to college (graduated 22 years ago) I had a student Visa card that went to my father to pay. When I graduated it became a regulare Visa in my name only. This was a great way for me to establish credit when I young. No I never abused it.

 

[Lisa loves Pooh]

Runs hides in corner. You is talking Statstics now I hate that class in college.

It's fake math.



(just kidding--don't all the statisticians get upset--I'm excellent at Math...stastistics... . My brother and mother--stink at math...like really bad. My brother tried many math courses in college as did my mother. The only one that they got a satisfactory grade in so that they could get their math credit....statistics. So you do the math. )



As far as credit with NO income. I do not understand how this is remotely possible. I got rejection after rejection with all those stupid credit apps in college. I had to go and get my own secured credit card with a whopping $250 limit. Oh how I miss those days. I was much better off without the plastic anyway.

 

[crisi]

Runs hides in corner. You is talking Statstics now I hate that class in college.

I never took a math class in college - scared of it. I'd been out fifteen years when someone said "hey, why don't you do stats" and my last math class had been high school algebra.