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    Money Matters for Parents

    Expert advice for managing money during the college years.

    Interview by LaTonya Taylor

    Personal finance expert Deborah Ross Nayrocker is determined to help families live debt-free lives. In her book, The Art of Debt-Free Living: Living Large on Less Than You Earn (Pleasant Word), Deborah provides tips and strategies to help people manage their money.

    But Deborah is more than a financial expert: She's also a parent and a strong supporter of Christian colleges. Deborah's a graduate of Bethel College in Indiana, and her husband graduated from Taylor's Fort Wayne, Indiana, campus. Their daughter recently graduated from Indiana Wesleyan University, and their son starts at Taylor University's Upland, Indiana, campus this fall.

    In this interview, Deborah answers common questions about preparing financially for college, finding financial aid, and teaching your high school student money management skills for college and beyond.

    "Sit down with your kids and help them figure out how to budget their money for items like clothing, school supplies, entertainment and other expenses."

    How should a family prepare financially for the college years?
    Families pay for college using yesterday's money, today's money or tomorrow's money. Yesterday's money comes from savings, today's money comes from a family's current income, and tomorrow's money is the money borrowed for a student's education. As their children approach their freshman year in college, parents need to pay off as much credit card debt—as much of yesterday's money—as possible. This provides more of today's money to go toward college tuition—and will hopefully reduce the amount of tomorrow's money going toward loans.

    Sometimes parents are tempted to invest in high-risk stocks, thinking that investing more may leave them with a larger amount to spend on college. But that can backfire. I recommend that parents invest more conservatively, opting for certificates of deposit, money market funds or low-risk mutual funds.

    What are some concrete ways of freeing up more of "today's money?"
    Look closely at household expenses. Try to keep your cost of renting or owning a home to less than 25 percent of your income. Also, look for ways to lower household expenses. Look at your grocery bill. Are there changes you can make in your food budget to save money? Assess your family's transportation needs. Do you have more cars than you really need? Could selling one and carpooling or taking public transportation free up some money?

    You may also be able to rethink your insurance coverage. For example, when it comes to health insurance, car insurance and other kinds of insurance, you can lower your monthly payments by paying a higher deductible. For example, collision coverage is 15 to 30 percent less with a $500 deductible than with the $250 deductible. That's a strategy that can also work with health insurance.

    Finally, look for ways right now to simplify your lives. Don't buy items that will become garage sale items or clutter. Form a strategy so that each purchase you make is a wise one. Preparing a year or two in advance helps you improve your cash flow so that when your student starts college, the financial adjustment won't be quite so dramatic.


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