Raising Money-Savvy Teens: How Parents Can Prepare for College and Beyond | Colleen Salchow | 009

[00:00:00] And her mom and dad knew she's still a good kid, but her mom and dad were like, you're going to pay for your cell phone. And she had to use her sneaker money. And it was one of the most powerful lessons. It was far more powerful than anything I could have brought to the table. And she learned a lot from that and really was developing a sense of resiliency too. And that's what many of us have had to learn, financial mistakes the hard way.

[00:00:24] Welcome to Coast FI Couple, a podcast where love meets financial independence. I'm Matt.

[00:00:40] And I'm Yana. Join us every other week as we dive into the world of Coast FI and share smart money tips for couples.

[00:00:45] We're going to be talking all about how to strengthen your bond and your relationship and bringing closer to financial independence.

[00:00:50] One episode at a time.

[00:00:52] All right, everybody, welcome back to the show. Today, we've got a special guest, and this is going to be a review of the importance of college planning and how to teach your kids to be money savvy.

[00:01:08] And also to just destigmatize the discussion, right?

[00:01:14] Great. So this is actually a really great opportunity because Colleen and I, we met back at FinCon just this past year in Atlanta.

[00:01:26] And this is, I knew right away, as soon as I met you, I was like, ooh, this is the type of guest I want to have because we desperately want to teach our own kids how to plan for college.

[00:01:37] And we don't want them to fall into any traps. And since we don't have any in college yet, it's perfect timing for us.

[00:01:45] And so we figured, hey, this would be a really good opportunity to get someone who's familiar with the information right on the show.

[00:01:52] So let me quickly introduce you. Again, this is Colleen Salco. Colleen's an accredited financial counselor.

[00:01:59] She holds a master's degree in counseling and was a former middle school and fourth grade teacher with, I think, five years of teaching experience. Is that right?

[00:02:08] Yeah. Did I miss anything?

[00:02:11] Yeah, no. I'm also a mom of two and an active duty military spouse.

[00:02:16] So, yeah. So we've had the opportunity. My husband and I have been married for 13 years.

[00:02:21] We've had the opportunity of living all over the country and in Japan for three years.

[00:02:27] So that's what part of the reason why I left the classroom was so that I could be a full time mom.

[00:02:33] But I also saw a need for financial education everywhere.

[00:02:39] Interesting. How long were you in Japan?

[00:02:41] We were there from 2014 to 2017.

[00:02:44] Okay. So three awesome years.

[00:02:46] For like on the military base? Is that...

[00:02:48] Yep. Yep. We lived in Okinawa, Japan.

[00:02:50] We lived on a military base, but we had the opportunity.

[00:02:54] I would go and grocery shop off base because at the time, the yen rate was very much in our American dollar favor.

[00:03:01] And it was fresher produce. And it was also a cultural opportunity for me to go and eat like the locals.

[00:03:08] So it was fun.

[00:03:10] Did you find that the financial literacy education over there was maybe different or more or less than what you see here?

[00:03:20] You know, we didn't... Our kids were toddlers at the time.

[00:03:22] So I didn't really have the opportunity to go and explore like the educational system in Japan.

[00:03:28] But what I've seen just within the military community is that it doesn't matter if you were...

[00:03:35] If you grew up in the Northeast, the Southeast, the Southwest, doesn't matter where you've grown up.

[00:03:40] It doesn't matter if you've gone to college or not.

[00:03:43] If you joined the military right after high school.

[00:03:44] It seems like all of us within the military community, there are just these two extremes.

[00:03:52] Either you know exactly where every dollar is going in that budget or you don't have any idea.

[00:03:59] You're just going with the flow.

[00:04:01] You know that there's going to be a paycheck on the 1st and the 15th of every month.

[00:04:04] But from there on, it'll happen.

[00:04:07] Interesting.

[00:04:08] So it's those extremes that I've seen.

[00:04:11] And then just the importance of having a knowledge of where your money is going.

[00:04:17] So when unexpected events happen, you both can handle it together.

[00:04:22] That's where I've seen a real need for financial education.

[00:04:25] Wow. Okay.

[00:04:26] Interesting.

[00:04:27] And I know that you work with women and couples particularly to try and help the communication

[00:04:35] bridge there.

[00:04:36] That's something that we've also been working with friends and family and on the show trying

[00:04:41] to help people realize that the togetherness is just as important as the journey.

[00:04:47] And so we want to teach our audience that the communication around money doesn't have to

[00:04:54] be something of a taboo, right?

[00:04:58] Yeah.

[00:04:59] It's not just enough to learn about money and apply the tools.

[00:05:02] You really have to learn how to hold yourself accountable to your partner and communicate

[00:05:06] effectively and understand each other's relationship with money and maybe emotional

[00:05:11] blocks with money and work through that together in a way that's not, you know, like you said,

[00:05:16] taboo.

[00:05:17] Taboo.

[00:05:17] Yeah.

[00:05:18] I know you've been doing this with couples now for a while.

[00:05:20] Can you give us a little bit of your experience?

[00:05:22] I mean, what are some of the maybe most difficult conversations that you've heard during

[00:05:28] your time working with couples?

[00:05:30] You know, I think the big consistency I've seen when I've worked with couples is just getting

[00:05:37] your why out there.

[00:05:39] Why do you want to budget?

[00:05:41] And identifying your why and then seeing what your partner's why is.

[00:05:45] And sometimes they are on the same page.

[00:05:48] Other times they're on different pages.

[00:05:50] And, you know, learning how to respect your partners, you know, why do you want to pay

[00:05:54] off the debt?

[00:05:55] Well, why do you want to pay off the debt?

[00:05:56] Well, because it's not always fun to do.

[00:05:59] And so I really, it comes down to, you know, what are their goals?

[00:06:03] And in the military community, our goals are constantly changing.

[00:06:06] Like we don't know where we're going to live in three years, two years.

[00:06:09] So like, what do we want to do now at this duty station with our money?

[00:06:12] Um, and really, you know, identifying those goals and as life happens, understanding, you

[00:06:20] know, when and how to adjust those.

[00:06:22] Um, but in terms of like, what are some of the most extreme, uh, cases I've seen with

[00:06:27] couples?

[00:06:28] It's not so much extremes as more as, you know, I I've seen couples that are like, I just

[00:06:33] want to pay off the credit card bill.

[00:06:35] And then one is like, but I let, but I find comfort in having all of this money, like five

[00:06:40] figures in a savings account.

[00:06:42] And so like, it's, it's usually like, okay, well let's work together and come out.

[00:06:47] You know, could you do both?

[00:06:49] Do you, what, what do you need all that money in the emergency account for?

[00:06:53] And going from there, just talking it out and working with the numbers going from there.

[00:06:57] And just open communication, have those long talks with a glass of wine on a couch and

[00:07:02] really break it down.

[00:07:03] Yeah.

[00:07:04] My, I don't drink when I'm on the call with the clients.

[00:07:10] It's okay.

[00:07:11] Um, I, I've had, I have had a couples though.

[00:07:14] Um, they, I had one that was like, I'm so sorry, but did you mind if we just like open

[00:07:19] a glass of wine together?

[00:07:19] I'm like, yes, one, have one on this one hour call.

[00:07:22] If it's more than one, you can have that later.

[00:07:24] But like, let's let you together.

[00:07:27] If this is something that, cause a lot of times when I've also seen couples just run

[00:07:31] out of time.

[00:07:31] I work with a lot of couples on the weekends and at around seven or eight o'clock at night

[00:07:37] in the evening, because life, work, family, you know, sporting, soccer practice.

[00:07:43] They've got the, you know, the church group, they've got this.

[00:07:45] There's so many things going on, but making that time to come together to start to establish

[00:07:50] those healthy financial habits so that when our time working together is done, you can still

[00:07:55] continue those conversations and those check-ins with each other.

[00:07:59] And if that involves a glass of wine, so be it, maybe it involves, you know, a good cup

[00:08:03] of coffee for somebody else.

[00:08:05] It depends on the family and really the time.

[00:08:07] Right.

[00:08:08] Yeah.

[00:08:08] That's something that we've talked about a little bit on the podcast is finding ways

[00:08:12] to make those accountability check-ins and those budget check-ins fun.

[00:08:17] And it's hard to do that.

[00:08:19] It's hard to trick yourself into believing that this can be a fun thing.

[00:08:22] It's hard to prioritize something that feels arduous.

[00:08:25] Right.

[00:08:25] And so, you know, sometimes it's just about establishing a baseline for communication and

[00:08:30] finding a pattern that works for you and your partner.

[00:08:33] Right.

[00:08:33] And then, and then building off of that and finding tools to simplify it and make it more

[00:08:38] efficient over time.

[00:08:40] Yeah.

[00:08:41] So one of the reasons that I was thrilled to have you on Colleen was your experience with

[00:08:46] the financial education system.

[00:08:48] And I, I, I got a big question for her off the bat is what are the gaps that you've seen

[00:08:55] in our financial education system, specifically in the U S but I guess since your experiences

[00:08:59] elsewhere as well, and what are you seeing that we are overlooking?

[00:09:04] Well, I think when it comes to teenagers, one thing that I think many of us are overlooking

[00:09:10] is this whole, you know, let's just get an app.

[00:09:13] Let's just get an app and we automate everything.

[00:09:16] And for teenagers, the act of writing things down on a budget, this is what I have my young

[00:09:22] clients do.

[00:09:23] We literally start off by tracking it down and writing down.

[00:09:27] Okay.

[00:09:27] Where did you go?

[00:09:28] Did you go to Starbucks?

[00:09:29] Write it down.

[00:09:29] Don't just, you can have an app help you remind yourself.

[00:09:32] Where did you use your debit card?

[00:09:34] But getting in the habit of writing down and listing where your money is going, it triggers

[00:09:39] different areas of your brain.

[00:09:40] And so when they, when these young adults come back to me and they're like, you know,

[00:09:45] I wanted to go to Starbucks.

[00:09:47] Then I remembered I'd have to write it down and remind, and like, look at it, forces them

[00:09:52] to look at it and really like, okay, did you realize that you spent, you know, this month

[00:09:57] you spent $60 at Starbucks.

[00:09:59] Did you realize that?

[00:10:01] And by having automations, there's pros and cons to automations, but one of the cons, that's

[00:10:05] one of the gap areas I see with young people is that they, it doesn't stick with them.

[00:10:11] And so many places are going cashless now that they're all, you know, tapping their debit card

[00:10:17] or holding up their phone if they're using Apple, whatever payment method they're using.

[00:10:21] Fewer and fewer adults are using cash.

[00:10:24] And so when I was a teenager in the nineties and mid Michigan, you know, I'd remember like

[00:10:29] I'd, I'd had my, my money to go to the movies and like get a box of popcorn and maybe like

[00:10:34] dinner with friends afterwards.

[00:10:35] Well, that could be like a $20, that $20 Saturday night, Saturday night, you could do

[00:10:40] that in mid Michigan in the nineties.

[00:10:41] Can't do that anymore.

[00:10:42] And so the, the act of paying with cash and not getting change back and everything that

[00:10:49] also takes away that areas, the areas of your brain being triggered.

[00:10:53] So that's one gap I see right now with young people.

[00:10:56] Just like the disassociation of actually spending the money and just like ignoring it with a

[00:11:01] card of sorts.

[00:11:02] Out of sight, out of mind.

[00:11:03] Yeah.

[00:11:03] Yeah.

[00:11:03] Out of sight, out of mind.

[00:11:04] Interesting.

[00:11:05] Yeah.

[00:11:05] Very interesting.

[00:11:06] Yeah.

[00:11:06] We've had a different experience in the sense that, you know, we're raising kids in today's

[00:11:11] age and we started with cash envelopes with our kids a little bit, but we don't carry

[00:11:16] cash ourselves.

[00:11:17] And so we'd have to go to the bank to withdraw money or to an ATM to withdraw money and then

[00:11:23] to pay them for chores or whatever.

[00:11:26] Like we pay them for good grades is kind of our thing.

[00:11:29] But then because we didn't have cash on hand, we, it wasn't a, an immediate return for them.

[00:11:36] So it almost felt like they weren't getting the reward when they were expected.

[00:11:39] So we had to plan ahead to have cash in a pot and we just didn't want to do that.

[00:11:44] Right.

[00:11:45] Right.

[00:11:45] I, we would get it at the grocery store.

[00:11:47] I would, that's when I would take out the allowance too.

[00:11:49] And we saw the same exact thing.

[00:11:51] I'm like, Oh, I forgot the allowance.

[00:11:53] And it's not, and it's not fair to them.

[00:11:55] And so finding that balance, cause we are also doing allowance.

[00:11:57] We do it a little differently in our house, but yeah, we've automated the money going into

[00:12:01] their account.

[00:12:02] And then we found with our own kids, Oh man, something happened with the automation.

[00:12:07] We didn't realize that there was a time, like there was a cutoff date on it until like two

[00:12:11] months later.

[00:12:12] I'm like, wait a minute.

[00:12:13] I know he hasn't spent anything.

[00:12:15] Why hasn't the account gone up?

[00:12:17] Turns out he hadn't been paid because of our automatic billing for him.

[00:12:23] And so, you know, it was a great lesson, but yeah, I mean, we're all, we're all just

[00:12:27] trying to, you know, find that balance.

[00:12:29] But even then it, yeah, it's a unique time to be raising kids.

[00:12:34] I mean, how, you know, finding that balance, the envelope system.

[00:12:37] Yes.

[00:12:37] Especially when they're little, they need that cash in hand.

[00:12:40] You see it and learn it.

[00:12:41] To see it.

[00:12:42] Yeah.

[00:12:42] Feel it, you know, really see it really kind of connects.

[00:12:45] But yeah, at a certain point, many of us have shifted towards automating that with online

[00:12:50] being transfers.

[00:12:52] Yeah.

[00:12:53] And just going from there.

[00:12:54] You mentioned you did things a little bit differently in your household.

[00:12:56] Would you be willing to show us a little bit, like, how do you pay your kids?

[00:13:00] What is the strategy that you came up with that, that worked in your household?

[00:13:04] Yeah.

[00:13:05] So we, we do allowance every week with chores.

[00:13:07] And so we, we flip back and forth who has to unload the dishwasher and who has to fold

[00:13:11] laundry.

[00:13:12] They also are responsible for cleaning their own rooms.

[00:13:16] And they got spoiled at this duty station.

[00:13:19] We bought a house and there just happened to be a bathroom for the, each have their own

[00:13:22] bathroom, which I remind my kids.

[00:13:24] I'm like, I didn't have my own bathroom until I was 24.

[00:13:28] Like the fact that you are 10 and you have your own bathroom, like, let's just bring it

[00:13:33] down a notch.

[00:13:34] But they are responsible for like cleaning that bathroom, scrubbing the toilet, scrubbing

[00:13:38] the tub, like the sinks and changing your, changing your sheets.

[00:13:42] This is a, this is a new thing now that we have a 12 year old.

[00:13:45] And so like, how often should you change your sheets?

[00:13:49] Like once a week and making their bed.

[00:13:51] So they have these expectations of chores that need to be done.

[00:13:54] If those chores are not done, then we will go in and transfer money from their accounts

[00:13:59] into our account.

[00:14:00] Oh, okay.

[00:14:01] Yes.

[00:14:02] Because they, because we've learned not to touch the automatic, not to touch the automation

[00:14:08] of the money going in.

[00:14:09] So then we will take the money from their account if it's not done, or if they start to argue

[00:14:14] with us, again, we're paying you to do this.

[00:14:17] Yeah.

[00:14:17] We've done that a couple of times.

[00:14:19] It only took once or twice, I think, because we said, listen, you got to clean the room

[00:14:23] or we got to clean it.

[00:14:25] Yeah.

[00:14:25] So we have a teenager and, you know, there's always, it's the first time I've ever had a

[00:14:31] teenager.

[00:14:31] So I'm kind of learning as I go, you know, but I found that instead of having the constant,

[00:14:36] you know, back and forth about, did you clean your room?

[00:14:39] Are you going to clean your room on time or whenever, you know, if, if my teenager doesn't

[00:14:45] clean their room when I've asked them to, or within a specific amount of time, I just

[00:14:51] do it.

[00:14:51] Um, but then I charge them and I give them a discounted rate, but I'm still $15 an hour.

[00:14:58] So if I spent an hour cleaning your room for you because you didn't do it, then you owe

[00:15:03] me $15.

[00:15:04] And I only had to float that one time.

[00:15:07] It was great.

[00:15:07] Yeah.

[00:15:08] So that, that's been our strategy.

[00:15:10] Sounds like something you did similar.

[00:15:12] Did they, now, did your teenager have to give you the $15 in cash or was there like an

[00:15:17] transfer between accounts?

[00:15:19] Great question.

[00:15:19] We use cube money, which is, um, it's a budgeting app that digital envelopes.

[00:15:24] It's, it is digital envelopes.

[00:15:26] And so you build out your budget in the app and, uh, it's great.

[00:15:30] It's very easy to use.

[00:15:32] We have the teenager on it as well, and they have the child account within it.

[00:15:37] So we can send them money.

[00:15:38] They can send us money.

[00:15:40] We can see their budgeting.

[00:15:41] They can't see ours, but it, it makes it a little bit easier to, you know, pull out

[00:15:48] if, if they owe us money and send them money for good grades or what have you.

[00:15:53] Yeah.

[00:15:53] Um, very, very simple.

[00:15:55] Yeah.

[00:15:55] So we can, we can have, we can charge them and they have to pull money out of their entertainment

[00:15:59] cube or their, you know.

[00:16:01] Mom cleaned my room cube.

[00:16:02] Yeah.

[00:16:03] Whatever.

[00:16:03] Yeah.

[00:16:04] Yeah.

[00:16:05] Yeah.

[00:16:05] Interesting.

[00:16:05] Yeah.

[00:16:06] I think, yeah.

[00:16:06] I, I, I think any of those ways, I mean, we're all, I love how you said like, I'm, this

[00:16:11] is my first time having a teenager.

[00:16:12] This is my first time having a 12 year old.

[00:16:14] And this is my first time having a 10 year old girl.

[00:16:16] And like, we're all just trying our best.

[00:16:19] But at the same time, we, you know, we definitely practice what we preach in this house.

[00:16:24] Like I, you know, I'm like your, your dad's a Marine and your mom's a budget coach.

[00:16:28] Yes.

[00:16:29] There's going to be follow through when it comes to what you were tasked to do.

[00:16:35] Awesome.

[00:16:35] And I think that that's hard now.

[00:16:37] Right.

[00:16:37] But they're going to appreciate it or at least respect the lessons later on when they're

[00:16:41] teaching their kids.

[00:16:42] Right.

[00:16:42] Yeah.

[00:16:43] Like you'll come back.

[00:16:43] In a good way.

[00:16:44] Yeah.

[00:16:45] Yes.

[00:16:46] Yeah.

[00:16:46] Awesome.

[00:16:47] Well, what about college?

[00:16:48] I am most curious to hear your take on college.

[00:16:52] One of the things that Matt and I have been going round about lately is, you know, preparing

[00:16:57] our 16 year old with the, uh, the skills to make an educated decision when it comes to

[00:17:04] the financial impact of college.

[00:17:07] Right.

[00:17:07] Um, because there's a huge difference in $8,000 a year tuition and 55.

[00:17:14] Yes.

[00:17:15] But for a 16 year old, it's just an arbitrary number.

[00:17:19] And I don't want to crush my kids dreams of going to a private school if that's what they

[00:17:24] really want to do.

[00:17:25] But at the same time, I want them to feel educated to make this choice that is going to financially

[00:17:32] impact them for a very, very long time.

[00:17:35] And, and, and trying to steer them away from potentially taking out predatory college loans

[00:17:40] and all that.

[00:17:41] So it's a delicate conversation.

[00:17:43] I want them to be equipped with the tools of knowledge around finances.

[00:17:47] And I think that that's a very important part of having the college discussion.

[00:17:51] But at the same time, I want to be supportive and I want to be excited and eager.

[00:17:56] So I'd love your, I'd love your take on that.

[00:17:59] Yeah, I, I definitely, I appreciate that.

[00:18:02] I, that you're having these conversations at the age of 16.

[00:18:04] And I think that's a great time to start having these conversations about what it looks like

[00:18:09] for college.

[00:18:10] You know, right now, more and more states are implementing financial literacy as a high

[00:18:15] school graduation requirement, which is great.

[00:18:18] I love that.

[00:18:18] I see in South Carolina down here, I've seen it in my home state of Michigan.

[00:18:21] This is great.

[00:18:22] And it should be, especially when we're looking at, you know, these teenagers, these 17, 18

[00:18:28] year olds looking at potentially taking out over a hundred thousand dollars of student

[00:18:32] loans just to go to a public university in state public university.

[00:18:36] So the real reality is we can't change the cost of tuition, but we can start to have these

[00:18:44] conversations with our, with our teenagers about what does their particular situation look

[00:18:50] like?

[00:18:50] Because as we're having more financial education coming into the schools, it's broad.

[00:18:55] It has to be a broad approach.

[00:18:57] But as we all know, you know, payday in every home looks different.

[00:19:02] And so what does it look like?

[00:19:04] So what does your family have set up for your teenager when it comes to a college fund?

[00:19:09] Is there a college fund?

[00:19:11] That's where I would start.

[00:19:12] Like, let's start talking about what accounts are already in place.

[00:19:15] Who has been contributing to these accounts?

[00:19:18] Has it been grandma and grandpa?

[00:19:19] Has it been, you know, aunts and uncles throughout the years?

[00:19:22] You never got a present from, you know, Colleen.

[00:19:24] Why?

[00:19:24] Because Aunt Colleen has always made a donation towards the 529 plan.

[00:19:28] Maybe have these conversations.

[00:19:30] These are the people that have been included into contributing to these accounts.

[00:19:34] What are the accounts?

[00:19:35] Is it a 529 plan?

[00:19:37] Is it an ESA?

[00:19:38] Have you set a different account, set aside specifically with the intention of going to college, but

[00:19:43] they don't have the same restrictions as a 529 plan?

[00:19:47] And what do those numbers look like?

[00:19:50] Because that's the key here.

[00:19:52] Where is, like, how much money are they going to have access to?

[00:19:56] Because this is where the normalizing the conversation comes into play.

[00:20:00] Do they have access to over, you know, hundreds of thousands of dollars?

[00:20:04] Okay, how are you going to be responsible with that large sum?

[00:20:09] If you don't have access to that kind of money, okay, what does this look like?

[00:20:13] If you do want to go to that private school, what is this going to look like?

[00:20:16] You're going to have to take out loans.

[00:20:18] Are you willing to take out a Parent PLUS loan with them?

[00:20:21] Do you want them to look at other ways of paying for school?

[00:20:25] This is the time to have these conversations.

[00:20:27] So one of the strategies that we recently came up with, and we're still kind of building

[00:20:32] it out, is having a conversation with our team that is less about this is what we think

[00:20:38] you should do, or this is how we see it, and more so giving them the guidelines of how

[00:20:44] to fill in the blanks.

[00:20:45] Let us know your top three schools that you're looking at.

[00:20:47] We'd like to know what the tuition looks like.

[00:20:49] We'd like to know what scholarships you're looking at, at getting to go towards those schools.

[00:20:53] We'd like to know what degree path you want to take and what kind of job you'd be maybe

[00:20:58] interested in getting with that degree.

[00:21:00] We want to know what the living costs are going to be for that particular school or city or

[00:21:03] whatever.

[00:21:04] Get those details for us.

[00:21:05] Let us know what you think your pros and cons are, right?

[00:21:08] That's a great...

[00:21:09] It's basically what I do with my clients.

[00:21:10] Have them do it.

[00:21:10] Go through a worksheet.

[00:21:11] Yes.

[00:21:12] Yes.

[00:21:12] I have...

[00:21:13] I kind of connect it back to that why.

[00:21:15] Why do you want to go to college?

[00:21:17] What do you want to study?

[00:21:18] Why do you want to look at that school?

[00:21:20] Is it because they have a really good football team?

[00:21:22] I'm down here in South Carolina.

[00:21:23] College football is kind of a big deal down here.

[00:21:25] Is that going to be worth XYZ and student loan in the back end?

[00:21:28] Right.

[00:21:28] Right.

[00:21:28] Do they offer your major that you're looking at?

[00:21:31] No.

[00:21:32] So should you be...

[00:21:33] You can still go to the game.

[00:21:34] I share that with a lot of my clients.

[00:21:36] I'm like, I graduated from Western Michigan University.

[00:21:39] I still went to Notre Dame football games.

[00:21:42] I went to University of Michigan games.

[00:21:44] They didn't care.

[00:21:45] They still let me go to the game.

[00:21:47] You can still cheer for them.

[00:21:49] But I just graduated from...

[00:21:50] It's a lot cheaper.

[00:21:51] Yes.

[00:21:51] Yeah, that's true.

[00:21:54] One thing that we're struggling with is because we...

[00:21:58] Full transparency, we have not set up a 529 or any type of educational savings account for our kids.

[00:22:04] We've been so focused on making sure that we're okay in retirement, that the kids don't have to take care of us.

[00:22:12] And so I think a lot of our audience is at that stage where they're just in the accumulation phase for themselves.

[00:22:17] They haven't necessarily set aside money for college.

[00:22:21] And we talked about this maybe in an episode or two ago where we actually recommend that they prioritize themselves first.

[00:22:29] It's like if you're going...

[00:22:30] If you're falling in an airplane, you know, you have that oxygen mask.

[00:22:32] You're putting that oxygen mask on yourself first because you don't want them to worry about you.

[00:22:37] And then when the college talk comes later on, you know, typically I would imagine that someone that's pretty far down the fire path, they might not necessarily have a 529.

[00:22:47] But that doesn't mean that they can't help support their college student by cash flowing certain aspects of it.

[00:22:53] True.

[00:22:53] So it might not be quite as tax advantage as a 529, but you do have more flexibility, which is one of the options that we keep in our back pocket.

[00:23:01] Right?

[00:23:02] Right.

[00:23:03] Maybe can we define what a 529 is maybe for the audience?

[00:23:06] Colleen, would you...

[00:23:07] Yeah, a 529 is an account that families can contribute to that grows tax-free.

[00:23:13] And the purpose of the 529 account is to be used for educational purposes.

[00:23:18] Now, the broadness of how to use a 529 has changed throughout the years.

[00:23:23] And one of the biggest benefits that was introduced in 2024 was that any money left over in the 529 plan, up to $35,000, the beneficiary can roll over into a Roth IRA account for them.

[00:23:37] That you would still have to follow the Roth IRA contribution limits for that year.

[00:23:41] Right now in 2024, a hypothetical 22-year-old would be up to $7,000 they can contribute.

[00:23:48] But do that for five years or whatever the limits are when that student is done with school.

[00:23:54] They can roll over up to $35,000 without any penalties from a 529 plan into a Roth IRA.

[00:24:01] That was one of the biggest arguments from families.

[00:24:05] Like, how do you know how much to put in there?

[00:24:06] How do I know if my kid's even going to go to college?

[00:24:09] What if they get a scholarship?

[00:24:10] Or they go to a military academy?

[00:24:12] All of these stuff.

[00:24:13] So there's a lot of pros to a 529 plan.

[00:24:16] But yeah, I have worked with clients that don't have that.

[00:24:20] And so then it's like, okay, what are your options?

[00:24:22] What are the expectations?

[00:24:24] And this is where the conversations with the parents...

[00:24:26] And that's why I include the parents on the calls when I'm working with their teenager or at the table if I'm working in person.

[00:24:34] Because it's usually the first time a lot of these families have had the opportunity to sit down together and really have the opportunity to discuss what their parents' plans are,

[00:24:44] how much are they willing to help, and what they expect their kids to do.

[00:24:48] Yeah.

[00:24:48] Yeah.

[00:24:49] It's not something that we've opened up our books for them yet.

[00:24:53] Because this is another taboo topic, I feel.

[00:24:56] I mean, they're becoming an adult.

[00:24:58] And I feel that once they are an adult, that conversation can be very fluid about like, hey, here's where we stand on our journey.

[00:25:06] And I think that that'll help them with their own journey.

[00:25:09] But when it comes to what have we set aside for you for college?

[00:25:14] You know, I didn't have any help with my college.

[00:25:17] You know, we stayed in state.

[00:25:18] We worked two or three jobs at a time.

[00:25:21] We cash flowed it as best we could.

[00:25:23] And not that that's the expectation.

[00:25:26] But, you know, I am a little worried that maybe, you know, our oldest might not fully realize what debt really means yet,

[00:25:34] because they have not taken any out.

[00:25:36] And they don't know how detrimental that is for their, you know, long-term return.

[00:25:42] And so, I'm not sure if you've had a conversation with anyone that maybe their kid didn't really appreciate how much of debt they were taking out

[00:25:52] and how long of a journey that was going to be for them to pay it off.

[00:25:54] Like, how do you even talk about that?

[00:25:56] Or vice versa, how much the parents potentially saved for their students, right?

[00:26:02] For their kids to go to college.

[00:26:03] Like, again, we saved $10,000 for you to go to college versus we saved $50,000 for you to go to college at 16 or 17 or maybe even 18.

[00:26:13] How do you feel the difference at such a young age when you aren't really connected to money?

[00:26:18] So, it's hard to have a conversation and feel like it's landing appropriately sometimes, you know?

[00:26:23] Yeah.

[00:26:24] Well, when I'm working with my clients, we actually look at, okay, what is not only the...

[00:26:29] What are the schools you're looking at?

[00:26:30] Okay, now let's take a look at some national databases.

[00:26:33] Okay, for 2023-2024 school year, this was the average tuition for in-state versus out-of-state for this school.

[00:26:42] And this is the cost of living for in-state versus out-of-state for this school.

[00:26:46] And when we start to add those numbers together, I am so impressed with the clients I've worked with that at 17, 18, it's starting to hit them.

[00:26:55] And they just been writing those numbers and then looking at, okay, well, this is what has been said.

[00:27:01] Oh, oh.

[00:27:03] Like, I worked with a client this summer.

[00:27:05] She was so excited.

[00:27:07] She wanted to go out of state, LSU.

[00:27:10] And when we started looking at those numbers, she's like, maybe I'll just stay in South Carolina.

[00:27:16] Yeah.

[00:27:17] And I mean, we'll see what happens.

[00:27:20] We'll see what school she gets into.

[00:27:21] She's a senior right now.

[00:27:23] But having these conversations, really looking at these numbers, really has been connecting with these young kids.

[00:27:30] And I think a lot of it is connected to the fact that they've been hearing so much about student loans for so long.

[00:27:37] I mean, if they are a senior in high school, that means that they started high school in 2021.

[00:27:43] Right around the same time, people started talking about loan forgiveness.

[00:27:47] It was a national conversation.

[00:27:49] And I think many of these young people, at least the ones I've been working with, have been listening more than people give them credit for.

[00:27:58] Interesting.

[00:27:59] Awesome.

[00:27:59] So you're a big proponent then of the parents opening up the books on what we have for college saved well before they start looking.

[00:28:09] It makes sense.

[00:28:10] That way they have an idea of what they're working with.

[00:28:13] It can help them make a more educated decision about what they're going to take for themselves.

[00:28:17] It can also help them be more realistic.

[00:28:20] I mean, it's just like, okay, so I don't have this.

[00:28:24] I hear, I see, because they're getting these images on social media, regardless of, you know, I don't know what your family's stance is on social media.

[00:28:31] But even if they don't have it, they're at school with other kids that have these platforms, access to platforms.

[00:28:37] And I mean, another conversation with that client that was thinking about going to LSU, she's like, I love this stuff with the sororities.

[00:28:45] And it's just so much money.

[00:28:47] And I'm like, okay, yeah, it is.

[00:28:49] But is it worth it?

[00:28:50] Is it worth it?

[00:28:51] And really bringing it back.

[00:28:53] Yeah, we're going to identify your why.

[00:28:54] But then we're also going to identify, is it worth it?

[00:28:57] Because what are you going to have to do in order to get what you need to go to join a Russia sorority?

[00:29:03] What about the dorm decorations?

[00:29:05] All this stuff.

[00:29:06] It's all going to cost money.

[00:29:07] So where is that money coming from?

[00:29:09] And is it worth it to use the money for that?

[00:29:13] Right.

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[00:31:22] Well, I think that that piece of the talk that we're having tonight is really helpful in how we're going to continue having these kinds of conversations with our teenager.

[00:31:31] And I'm really interested to see how that lands and how that goes.

[00:31:37] It's hard because they're 18 and technically can take out whatever loans they want, even with us not present.

[00:31:46] At that time, they'll be.

[00:31:47] At that time.

[00:31:48] And so...

[00:31:49] I think that's our fear as parents is that our kid is going to go out and take out a bunch of student loans.

[00:31:55] Like, oh, okay.

[00:31:56] Well, I mean, I remember being on campus and seeing, you know, tables for these vendors who are selling credit cards for a slice of pizza.

[00:32:03] So those laws have changed.

[00:32:05] It sounds like you may have been in college around the same time I was.

[00:32:08] I graduated high school in 2002.

[00:32:10] I will put that out there.

[00:32:12] And I remember walking around Western Michigan's campus and yeah.

[00:32:16] Live long bracelet.

[00:32:17] Well, it was bright orange.

[00:32:18] Yes.

[00:32:18] Send me in.

[00:32:19] Like, you know, like, or was live strong or whatever the bracelet was.

[00:32:22] What?

[00:32:23] Yeah.

[00:32:24] Oh, yeah.

[00:32:25] But again, I come back to like, my mom and dad did talk about this like credit card.

[00:32:30] So you only need that you have one credit card.

[00:32:33] It's for an emergency.

[00:32:34] My mom was the co-signer on it.

[00:32:36] And so I knew she was going to see it.

[00:32:39] And so I better be able to justify what was on that credit card.

[00:32:43] She was also the co- she also helped us open our- my brother and I were also- he went to the same university.

[00:32:49] She helped us open up our checking accounts at Comerica Bank in Michigan.

[00:32:55] And so what we didn't realize at the time until she brought this up, she was also getting a paper statement of where the transactions were going to.

[00:33:04] And so she could see every time we went out to the bar.

[00:33:07] We were 21.

[00:33:08] But like every time we went out to the bar and everything, and she could see it.

[00:33:13] And my mom still said something.

[00:33:15] And so just because they're 18, if you are still helping them some way financially, you can still have a say.

[00:33:22] And I remind that to not only young clients, but also their parents too.

[00:33:26] Great tip.

[00:33:28] You still- I mean, if they're still on the payroll, if your kids are still on the payroll somehow, someway, even with health insurance.

[00:33:34] Yeah.

[00:33:35] You can still be there to support them and guide them.

[00:33:37] Yes.

[00:33:38] I love that phrase, to support them and guide them.

[00:33:40] You know, I don't ever want to be the type of parent that's like, you have to because I said, or I'm going to pull the rug out from underneath you.

[00:33:48] You know, I really want to equip my kids to make financially sound decisions, not just for right now, but financially sound decisions that are going to help them 5, 10 years down the road.

[00:33:58] So yeah.

[00:33:59] And it also just comes back to like starting these conversations now as teenagers.

[00:34:03] Let's talk about like, you know, these are our concerns.

[00:34:07] This is what we've seen with student loans.

[00:34:09] These are the difference between private loans versus federal loans.

[00:34:14] This is what, you know, this is what I tell them.

[00:34:19] It's okay to say like, we don't want you to be in debt.

[00:34:22] We don't want you to be in debt.

[00:34:24] But at the same time, acknowledge that the cost of tuition at an in-state college is significantly different now than it was in the early 2000s.

[00:34:32] I mean, most of us in the early 2000s for an in-state tuition, I mean, 30,000, you can get a four-year degree of about 30,000.

[00:34:41] Now that's like per year.

[00:34:43] And it's no fault of theirs.

[00:34:45] It's no fault of ours as parents.

[00:34:47] It's just the reality.

[00:34:48] So, all right.

[00:34:49] What are we going to do?

[00:34:50] I also encourage working during school.

[00:34:53] For students, studies have shown that students that work 20 hours a week or less with low stress jobs have higher GPAs.

[00:35:01] Wow.

[00:35:02] Yes.

[00:35:02] Yeah.

[00:35:03] What the studies have shown they're finding is that it gets the kids out of the room, like out of the dorm room or out of their apartment and around other people.

[00:35:11] So, I worked in a college camp cafeteria and it was a low stress job.

[00:35:16] I mean, we were swiping cards.

[00:35:17] We were refilling trays and food.

[00:35:21] And what I was able to do is I was able to network with other kids that I wouldn't have had access to because they didn't have my major.

[00:35:29] But then talking to them, you could hear, well, you know, his girlfriend took that class from this professor and it did not work.

[00:35:36] Don't, yeah, don't, you're networking while you're working.

[00:35:39] You didn't even realize it.

[00:35:40] Interesting.

[00:35:40] I like that.

[00:35:41] I'm writing that down.

[00:35:42] Thank you.

[00:35:43] You're welcome.

[00:35:44] Yeah.

[00:35:45] All right.

[00:35:46] So, I know that right now, you know, I've got your most recent social media post about how important this time of year is, is the FAFSA.

[00:35:56] Can you explain maybe for the parents out there, like what should parents know and be prepared to present to their kids or help their kids along with this process?

[00:36:05] Because I know it used to be really difficult.

[00:36:08] Yeah.

[00:36:08] The FAFSA has changed recently.

[00:36:12] And for the listeners that are like, what is she talking about?

[00:36:14] The FAFSA is the free application for federal student aid.

[00:36:18] And this is an application that traditionally has gone live on October 1st.

[00:36:25] The last two years, this in 2023 and now in 2024, that has been delayed by the Department of Education.

[00:36:32] And the reason why they've delayed it is because they have finally, finally gotten the different departments.

[00:36:39] So, they have the Department of Education talking to the Social Security Administration.

[00:36:43] And they can also now talk to the IRS.

[00:36:47] So, in the past, parents have had to go back and get like last year's tax returns, pull them out of the fire safe or wherever they kept them.

[00:36:56] And then, you know, use that tax return to fill out, you know, what was your family's income for the last tax year and all that stuff.

[00:37:03] Now, the process looks like this.

[00:37:06] Students, if they're being claimed by their parents on their parents' taxes and their parents, both need an FSA ID.

[00:37:15] And what that basically does is that's the Department of Education talking to the Social Security Administration and saying,

[00:37:22] is this person who they are, can we check that?

[00:37:26] That FSA ID process takes about one to three business dates to process.

[00:37:31] Then, once you have your FSA ID, you can apply for the FAFSA.

[00:37:36] Now, right now, as we're recording this, it's the 19th of November.

[00:37:42] Yesterday, the Department of Education released the beta version of the FAFSA to everybody.

[00:37:47] So, basically, they're testing out this FAFSA application, trying to identify any significant bugs or, you know, the systems not talking to each other the right way.

[00:37:58] They've had a couple of previous, I think they're on stage four of the beta right now.

[00:38:02] Because last year's rollout was horrendous.

[00:38:05] I did hear about that.

[00:38:06] It was just, like, families were spending hours just trying to log on to the site.

[00:38:12] And then it came out a couple months after the release in January that one of the formulas was off.

[00:38:18] So, people that should have received aid weren't getting aid.

[00:38:23] And it was just a mess.

[00:38:25] So, the Department of Education has learned from that process, is trying to make it all go smoother.

[00:38:32] So, what do parents need?

[00:38:33] Parents definitely need their FSA ID.

[00:38:35] I would still encourage parents to have their paper copy of their 2023 taxes available, accessible.

[00:38:42] So, in case something does come up, they have it right there.

[00:38:45] They still have it.

[00:38:46] They're also going to want to have social security numbers and addresses.

[00:38:50] And make sure that you're there to support your child as they fill out the application.

[00:38:55] Be the second set of eyes on it.

[00:38:56] Look it over with them.

[00:38:57] Because the littlest things, like if your child writes out the word road in their address, and you use the abbreviation RD for the same address, it can kind of throw it off.

[00:39:10] So, just make sure that the information you're providing matches up like that.

[00:39:15] But it is still encouraged.

[00:39:17] I haven't had a client yet where I have not encouraged them to fill it out.

[00:39:22] I would still encourage everyone to fill it out, especially if you're going to a public university.

[00:39:26] Because what they're going to do is they're looking at the federal budget for education, the state budget, and more specifically, the school budget.

[00:39:33] And so, they need that FASFA application to go through the list, go through those budgets to see what you qualify for.

[00:39:41] And the sooner you fill it out, the more likely you are to receive grants and scholarships.

[00:39:45] Studies have shown that students and families that submit their FASFA in the first three months that it's open receive twice as many grants and scholarships.

[00:39:53] As those that wait to do it later on.

[00:39:57] That's a great tip.

[00:39:59] Yes.

[00:40:00] Because we're going to be doing this next year.

[00:40:02] This time next year.

[00:40:03] Yeah.

[00:40:03] Yeah.

[00:40:04] Yeah.

[00:40:05] And so, hopefully by next year, they've rolled it back to October.

[00:40:09] Ideally, you want it in October because then it gives you more time to compare the aid letters, especially if your teenager is kind of figuring out like, where do I want to go to school?

[00:40:17] You want those aid letters to compare.

[00:40:20] Who's going to show you more money?

[00:40:21] Yeah.

[00:40:22] Amazing.

[00:40:22] Great tip.

[00:40:23] Amazing.

[00:40:24] Well, Colleen, I think this has been really educational for us.

[00:40:29] Like we're getting our toes now kind of dipped into the pond that is this education stuff for college and you've been a big help.

[00:40:35] How can other people out there get in touch with you?

[00:40:38] I know you've got your own classes and things, but what's the best way to reach out if they are interested in following up with you?

[00:40:45] Absolutely.

[00:40:45] The best way to reach out to me would be to go to my website, www.selcocoaching.com.

[00:40:51] You can schedule a free 15-minute phone consultation with me right there.

[00:40:55] And then you can also follow me on Instagram and Facebook at Selco Coaching.

[00:41:01] I'm also on LinkedIn.

[00:41:02] I'm sure you'll put all those handles in the show notes.

[00:41:05] But yeah, I'd be happy.

[00:41:07] I love working with teenagers.

[00:41:08] I still get to teach.

[00:41:10] I really feel like I still get to be the teacher when I'm working with these kids.

[00:41:14] I've worked with half of my clients I've worked with virtually.

[00:41:17] So, you know, understanding that, you know, being on a computer screen, it's not the most fun.

[00:41:22] I get it.

[00:41:23] These kids have gone through a lot of virtual schools or classes, but by being online, they can do it from the comfort of their home.

[00:41:30] And I've noticed that a lot of people are more comfortable talking about these numbers from the privacy of their own home.

[00:41:36] Okay.

[00:41:37] Excellent.

[00:41:37] Yeah.

[00:41:38] Well, we will definitely include those contacts in the show notes.

[00:41:42] Any questions before we wrap up today's show?

[00:41:47] One more thing.

[00:41:48] When it comes to...

[00:41:49] One more thing I'd like to add is that when it comes to parents with teens in finances, as a parent myself, I know it's not easy to see your kid make a mistake.

[00:42:01] Yeah.

[00:42:02] But it also gives them that opportunity to develop that sense of resiliency, learning from their mistakes.

[00:42:07] So if you have your teenager, if they've made a financial mistake, they're not a bad person.

[00:42:13] But let them also have that opportunity to learn from it and pay for whatever was...

[00:42:19] Maybe it was a cell phone.

[00:42:20] I worked with an eighth grader last summer.

[00:42:23] She was saving money to go buy a pair of sneakers that her mom was not going to buy, but she was one of the top babysitters in her neighborhood.

[00:42:30] One day, she decided to go jump in the neighborhood pool, South Carolina.

[00:42:33] It was hot.

[00:42:34] She jumped in, realized that her cell phone was in her pocket.

[00:42:39] And her mom and dad knew she's still a good kid, but her mom and dad were like, you're going to pay for your cell phone.

[00:42:45] Yeah.

[00:42:45] And she had to use her sneaker money.

[00:42:46] Yeah.

[00:42:47] And she...

[00:42:48] It was one of the most powerful lessons.

[00:42:51] It was far more powerful than anything I could have brought to the table.

[00:42:54] And she learned a lot from that and developed...

[00:42:56] Really was developing a sense of resiliency too.

[00:42:59] And that's what many of us have had to learn financial mistakes the hard way.

[00:43:02] But by getting through them, you become a stronger person.

[00:43:06] That's how you actually learn from it.

[00:43:08] Yeah.

[00:43:10] Failing is the biggest lesson.

[00:43:12] Having to feel the pain a little bit.

[00:43:14] Yeah.

[00:43:15] Yes.

[00:43:15] I like to tell people my favorite learning style is the hard way.

[00:43:20] I tend to...

[00:43:22] Those are the lessons that...

[00:43:23] It feels good.

[00:43:25] Yeah.

[00:43:26] Yeah.

[00:43:26] I learned that one the hard way.

[00:43:28] It's stuck.

[00:43:29] Ouch.

[00:43:30] All right.

[00:43:31] Great.

[00:43:31] Well, hey, thank you so much for joining us today.

[00:43:33] And look forward to maybe getting you on the next time.

[00:43:36] Thank you.

[00:43:37] Yes.

[00:43:37] I had a great time.

[00:43:39] Alrighty, gang.

[00:43:39] Signing off.

[00:43:40] We'll catch you next episode.

[00:43:41] Thank you so much.

[00:43:42] Bye.