How parents can start smart money conversations with their university-bound children

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If the cost of tuition wasn’t enough, inflation means attending college or university in 2023 is even pricier than expected. What’s a first year to do? This story is part of a crash course in personal finance for students and parents. Read the full guide.

Seven in 10 parents avoid talking about money regularly with their children, believing themselves to be ill-equipped for those conversations, according to a 2018 CIBC poll.

However, research has discovered that kids today are curious and motivated about managing money earlier than their parents were. And this same research shows that the financial habits of parents are, like it or not, passed down to their children.

As a result, kids who are taught money management by their parents are more likely to demonstrate healthy financial behaviours like saving and budgeting. They are also less likely to have student debt and a bad credit score.

A 2022 study even found that those who learned financial literacy from parents during their youth are more likely to have flourishing romantic relationships.

Below are some tips for starting money-wise conversations with your teenager in preparation for their college years.

Have the conversation early

Murray Baker, manager of financial empowerment at Family Services of Greater Vancouver and author of The Debt-Free Graduate, said that the responsibility over who should teach children financial literacy is unclear, with both school and parents assuming the other will take control. Often, the children often get no guidance at all, he says.

That situation comes with a cost. According to a 2022 survey by the U.S.-based Financial Educators Council, a lack of financial knowledge cost people an average of US$1,819 that year. This includes expenses arising from credit card interest and fees, unnecessary luxury spending, bank overdrafts and fraud.

Cindy Marques, a Toronto-based certified financial planner at MakeCents, recommends parents start the money conversation early, and keep it simple. For example, talk about weekly grocery costs.

You don’t have to know necessarily the inner workings of a TFSA or a RRSP,” said Ms. Marques. She suggests just talking about the things that you’re paying for in a relaxed way so that money management doesn’t feel like a difficult topic to broach.

Keep the conversation interactive

Liven up the conversation with interactive exercises, said Vancouver-based Alim Dhanji, a certified financial planner at Assante Wealth Management. For example, task them with budgeting a trip to an amusement park. Have them figure out the ticket cost, transportation, parking and lunch price.

“It can really help set them up and teach them to be wise with their money,” Mr. Dhanji said.

Plan out the road map

Mr. Murray said that the first step in talking about money at college is figuring out the student’s “financial road map.” This means parents should go over all available money from summer jobs, student loans and scholarships. Then they should add up costs. Most universities have budget calculators, like this one from UBC.

This approach ensures that expenditures are accounted for beforehand, so students are not putting expenses on credit cards or scrambling for part-time jobs.

“It gives you that peace of mind knowing that you’ll be set for the year so you can focus on your academics,” he said.

Incentivize Saving

Mr. Dhanji says that young people feel pressure to keep up with trends on social media where the latest brands and gadgets are often being flogged. This boosts discretionary expenses and encourages young people to put purchases on store credit or financing.

Mr. Barker says that a matched savings account backed by parents could decrease this type of unnecessary spending. Every dollar the student saves, the parents would match. This means that buying a $60 pair of jeans would in effect cost the student $120.

“It really provides that extra incentive for savings,” he said. “And it’s probably a much more constructive way to give your kids money.”

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