The tug-of-war between parents and kids in college plays out like a game of “Survivor”; the one that outwits the other gets to spend the money.
When college students tap out the universal distress call, “Send money” it ends up distressing parents, too. Rush to a kid’s aid too often and (despite botany courses) she’ll think money grows on trees. Ignore the plea and you’re branded a tyrant.
“Like every parent, you try to do what you can,” said David Mogle of St. Anne, Ill., who has two kids in college. “You want to help out your kids and you want them to learn the value of a dollar. But we can’t bankrupt ourselves and we can’t overcompensate at the expense of our other three [children].”
If you’re like most parents, you are no tightwad, but you’re no ATM either. Chances are, you’ll be happy to help pay for groceries, books and the occasional midnight snack. But you’ll draw the line when overspending on pizza, beer, CDs and clothes leaves your kid begging for a bailout.
Here are some ideas, ranging from high-tech to no tech, to strike a balance:
– Matching funds or a lump-sum distribution. Offer to match or double the money your child earns at a summer job or during the school year. Your kid takes some initiative and you can help make the pot grow faster.
You can also agree to a one-time distribution to cover an entire year of expenses. This approach can force your kid to stick to a budget, but it can also leave you susceptible to a mid-year bailout.
– Gift cards. You can give a gift card to a general merchandise store and specify that it be spent on everyday necessities like toothpaste and soap. But there is a risk involved. Places like Target, which has a two-part card that lets you reload the part you give to your kid, and Wal-Mart also carry snacks, soda and CDs, so your kid could end up spending too much on impulse items. But the amount is limited.
– Pre-paid or stored value cards. When Visa began its Visa Buxx program in August 2001, it wanted to help parents keep track of their children’s spending habits. At first, the program, which draws money from a special account, was geared toward kids between the ages of 13 and 17. But Visa USA found that it has become a popular product among parents of college-bound kids, said Rhonda Bentz, director of public affairs for Visa USA.
Because it is not a credit card, young people can’t use it to build a credit history, but they can’t ruin their credit rating either. Money put into the special account does not earn interest and there are limits to how much can be in the account at a time–usually no more than $1,000.
Banks participating in the program may charge an annual fee of $10 to $15.
While the tracking feature sounds convenient, crafty students could find loopholes, such as getting cash back at the grocery store. You see a $20 grocery bill when they’ve actually bought a $1 pack of gum and taken the extra $19 to spend on CDs.
– Credit cards. You could create a program similar to Visa Buxx by getting your student a credit card with a low credit limit. The danger of doing this is that bad behavior could blemish his credit history, and possibly yours if you had to co-sign for the card.
Remember that once your kid turns 18, she can apply for her own credit card. While that doesn’t directly affect your credit history, it can put a strain on your financial resources if you have to help make the monthly payments.
– Checks and debit cards. You could also disperse money into a checking account and give your student a debit card linked to that account. But you could find those funds being sucked up by ATM user fees if your kid uses a machine not affiliated with the account.