'Financial Checkup' Time For College Kids

In a few days, most college students will be coming home for Thanksgiving break, many for the first time since the summer.

It's the ideal time for parents to talk to them about money, says radio host and financial author Dave Ramsey.

He says parents need to take this time to give their kids a "financial checkup."

Ramsey offered advice along those lines on The Early Show Tuesday.

"Don't put your hands over your ears," Ramsey cautions. "Most parents will find that their kids have done some stupid things. The most common is that you have the opportunity to sell your soul and get a free hat for a credit card. These (credit card) people are very aggressive on campus, and everybody knows that."

Ramsey believes credit cards are especially dangerous for young people who don't have jobs. He doesn't think anyone should ever have a credit card, ever. He says he sees way too many people walk into his office for help who are still carrying debt from their college days.

Being open about the problem would be revolutionary for many families, Ramsey says.

"Simply talking out loud can really change a kid's direction," he said.

If you're unsure how to start the conversation, Ramsey suggests a mom or dad say: "I heard them talking about this on TV and I wanted to ask you ..."

If you have the financial talk with your child and discover he or she is in some sort of hot water — maybe she has already spent all of the money you gave her for the semester, or maybe he's racked up some credit card debt — what do you do?

APOLOGIZE TO YOUR KIDS

What? Yes, it's true! Ramsey says you owe your kids an apology for not teaching them how to avoid the financial mistakes they've made. Many parents don't feel competent to handle their own money, and so they never really discuss it with their kids. But that attitude doesn't help your child, and these certainly are not skills they are going to learn on their own.

The conversation isn't a time to get angry. You need to be supportive, Ramsey says. Approach your child as if you were an older, wiser friend — not a know-it-all parent.

"At this age," he says, "they are going to do what they want, anyway. It's not illegal to be stupid."

SHARE YOUR OWN MISTAKES

Parents hate to admit they are wrong, or that they don't know something but Ramsey says, "I think it's healthy when you have a teen in front of you for you to say, 'I'm $20,000 in debt.' That's powerful!"

Sharing your mistakes enables you to address your child's problem in a loving way. You are trying to prevent them from making the same mistakes you did; you are proof that the road they are heading down is bad news.

DON'T BAIL THEM OUT

You can help your child, but don't bail him or her out completely. Ramsey sees many parents who choose to bail their kids out, and believes this is a mistake.

"Lots of parents have the money to help, and it's easier to give it than to deal with the issues," Ramsey observes. "You can't fix everything by writing a check. ... It might not be money that's the problem, it's the lack of a plan. What message are you sending if you just hand out money?"

That said, it is OK to give your kids some money. For instance, if they sell something to help pay off debt, offer to match that with your own money.

Most importantly, you need to help your child develop a plan to get out of their trouble.

Here are some specific steps you and your child can take to help fix their financial trouble:

HELP DEVELOP A BUDGET: "A college budget is not a complicated thing," Ramsey said. "I did one over the phone with a 21-year-old (his daughter) just the other night. Basically, it's, 'Here is your rent money, here is your grocery money, now where is the rest of the money going?' "

Remind your child that working together to come up with a budget doesn't make him or her accountable to you; you are helping your child take accountability for himself or herself. This is what it means to be an adult.

CUT UP THE CREDIT CARDS: Not a surprise. Enough said.

BRAINSTORM JOB IDEAS: Your child doesn't have to get a job, but you might want to suggest that option. Help him or her come with some ideas for part-time jobs they could get while in school.

FOLLOW UP: Change is a process, and there is not a "light bulb moment" when learning to manage your finances. Your college student is going to continue to need some guidance on this. And hey, chances are good that the opportunity to follow up with your child will present itself — when he or she calls to request more money!