The following article is written by our partner in personal finance, Adam Carroll.

Cutting the Financial Cord (For Students)

There is a commonly held approach to teaching a kid to swim that moves them from shallow water, to putting their face in the water, to learning and practicing strokes, to jumping in from the side of the pool, and eventually swimming full laps and diving from the diving boards. Very rarely would a competent swim instructor throw a brand new swimmer in the deep end to “figure it out”.

Yet, very often what happens with students who make the leap from high school to college is they’re thrown in the financial deep end, metaphorically, without ever learning to swim.

You Are Expensive. 

In the first chapter of my book The Money Savvy Student, I focused on the idea that You Are Expensive. The majority of high school and college students I meet don’t fully realize how much it costs to support their life and lifestyle choices. Their parents, after all, are picking up much of the tab.

In chapter two, I followed that notion up with the fact that your parents don’t want to support you forever. I was twenty years old when my Dad said to me, “any money you receive from me from here on out, consider it a loan.” Wait, I thought, shouldn’t this support continue for some time to come? For the past decade, my experience has been that more students fall on the side of assuming parental support than assuming financial independence.

Findings from Wakefield Research:

To better understand how students and their parents feel about student debt and college financing, we partnered with Wakefield Research to conduct an online survey of 1,000 college-age students and 500 parents of incoming freshmen or current college attendees. We asked them a range of questions about college financing, their feelings and approaches toward debt, ways they planned to pay for school, and more. Here are two of our key findings:

More than 2 in 3 students believe they should be the one to finance their college education

It was surprising and encouraging to see that in the State of Student Debt survey done by Wakefield Research for Thrivent Financial that more than 2 in 3 students believed that they should be the ones to fund their college experience, NOT their parents.

Majority of students believe quality of life should be the same in college

And while the above research finding is hopeful, one of the follow-up questions suggested that students want to swim on their own, but may be underestimating just how deep the deep end actually is. It seems that the majority of students surveyed believe that their quality of life should be the same as it was while at home.

The fact of the matter is, college is an awesome time in a young person’s life. There is more freedom, more flexibility, and far more opportunities to get yourself into challenging situations moneywise when not under your parents’ watchful eyes.

How to begin cutting the financial cord:

So, my recommendation is to begin cutting the financial cord from your parents while still living under their roof to practice swimming on your own before actually going into the deep end. The following five suggestions will help you become accustomed to your new college lifestyle, before you actually have to begin treading water.

  1. Operate on a Budget in High School: It may not seem like you have a great deal of expenses to budget for, but the mere act of creating a simple income & expenses budget will get you moving in the right direction. 
  2. Don’t Rely Solely on Your Mom & Dad: A large part of being at college is understanding that you’ll have to rely on yourself more often. My kids each get an allowance every week for the chores they do around the house, and they’re expected to use that allowance for the things they want to do, like going to basketball and football games, eating out with friends, and buying items like cell phones.
  3. Work, Save, and Get Used To It: You’ll be doing this for the rest of your life, so now seems like a great time to start the habit of working and saving. By creating the savings habit while in high school, you’ll have built a habit that will serve you well into your working years and you’ll have money set aside while in college.
  4. Dip Your Toe Into Buying What You Need: You may be surprised with what a trip to Target, Costco, or Walmart costs most families, just to buy necessities like toiletries every month. If you have no idea how much basic necessities cost, it will be worthwhile to pay attention to the next shopping trip. Better yet, start buying some of those things with “your” money to make the experience even more real.
  5. Have Very Candid Conversations With Your Parents About Money: Ask them how much they think it will cost for you to live at school and what the finances of that might look like. Find out if there’s money saved for college, if you’ll be totally on your own while at school, and what they did during their college years. Use this discussion guide to help navigate the conversation.

Much like taking swimming lessons as a kid, by taking any one of the 5 steps above you’ll be readying yourself for a few laps in the deep end. And by being better prepared for the financial decisions you’ll make in college, you’ll leave school in a better financial position with far less debt, and some built in positive habits that will impact your life greatly down the road.

Adam Carroll

Personal Finance Expert and Author