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Parents need to share their financial mistakes with students

Do you dread receiving a phone call from your university-aged child telling you they're broke? Many parents have been in this situation not once, but multiple times. No matter what spending limits a parent thinks they have established with the young adults in their lives, students sometimes seem to be unable to stick to their budgets. Avoiding debt when they graduate is not the only reason to help them set financial boundaries. An honest discussion between parents and university-aged children is one of the first steps in establishing an adult relationship.

When planning for a college or university education, parents and students need to agree on what is expected – and most importantly, who is paying for their education. In my case, I worked each summer to help pay for my education. My parents provided a monthly allowance while I was away at school. While I managed for the most part, I realize now that I should have established a budget to better live within my means.

Starting the money conversation can be difficult. When having "The Talk," consider providing examples of good financial decisions you've made: The earlier you start saving, the more purchase options you have, for example. But also consider giving them examples of how you failed to managed money well and what that ended up costing you. Letting them know you have some regrets makes them realize that you know it is difficult sometimes to defer purchases or fun. Buying a house or condo may be a bit too far in the future for kids to understand, but perhaps a computer or car is a goal they can better relate to.

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These types of conversations can start well before starting postsecondary school. My daughter is already an avid saver and has been earning money through babysitting for some time. We've already had discussions about saving for specific goals, and she is currently saving for a laptop with the goal of purchasing it before starting high school in the fall.

Perhaps the most important reason to have the talk before students start or return to school in the fall is to alleviate anxiety about finances during the school year. According to the latest 2014 RBC Student Finances Poll, 57 per cent of parents believe their child is worried about having enough money to last throughout the year while 71 per cent of students said this is causing them anxiety. By having a conversation and planning for the coming year now, prior to starting school, parents can work with their children to determine if there are any shortfalls in their budget and work to identify additional sources of financing.

Here are some issues you may want to address in your talk:

List the real costs of an education. Sit down to discuss the actual costs associated with an education. Tuition, books and housing if your student wants to live away from home are some of the hard costs, but what about groceries, toiletries, cellphone, Internet, clothing and entertainment? It is often the discretionary spending that can get students in trouble and living away from home is the first time they will really understand just how much these can add up.

Create a budget. Once you have a list of the real costs, determine which expenses you and your student will be responsible for and which you can pay for or help with. Will you cover the cost of tuition and transportation while your student pays for textbooks and all discretionary spending, like entertainment? Set boundaries on how much the student should spend each week and discuss how they will track it.

Decide how you will address requests for extra funds. If your student spends more than the budget you've agreed to and contacts you for more money, you need to decide when it makes sense to help them out. Ask what purchases were made that caused him or her to exceed the allotted finances – there may be good reasons.

Use student discounts. Students qualify for discounts on items such as public transit, movie tickets and student bank accounts, as well as services around campus such as restaurants, hair salons and other retailers. Take some time to investigate these options and ask your child to make sure to access them – the savings can really add up.

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Melissa Jarman is the Director of Student Banking at RBC. She is the mother of two children ages 10 and 14, and already helping them prepare for their postsecondary days.

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