Recently, I was talking to my son’s friend about what she plans to do after graduating high school. She has a variety of interests and ideas, from dentistry to cosmetology to real estate. Because she isn’t certain just yet, she is considering attending college and majoring in business as a “back up” plan.

This led me to wonder – why would you spend over $100K on a “back up” plan? What if you put that money toward your primary mission in life?

A high school counselor I spoke with told me about meetings where he knew the student wasn’t interested in college but the parents were adamant that their child would attend. This idea that you need a college degree is common among high schoolers, and their parents. It comes from an era when attending college was a recipe for success, and majoring in business meant you could succeed just about anywhere. 

But that’s not the case anymore. With the rising cost of higher education and the numerous opportunities available for young people, shouldn’t college be a career advancement tool instead of a fallback position?

The Myth of the Four-Year College

There is so much pressure on high school graduates to commit to a career path at a very young age. At age 16, one of my sons wanted to be a circuit court judge. Now, he’s graduating from college with a degree in Political Science. And he wants to write music and open a recording studio.

What I want parents to know is that teenagers are uncertain about their career path.  Additionally, college is not the only way forward for a recent graduate. If your child is not sure about their direction, maybe they need to take some time off school and work. They will likely find that knowing what they don’t want to do will help them hone in on what they are meant to do.

Sometimes, the right school choice is years down the road, or not at all. But using college as a backup plan instead of a clear and motivated way forward is a very expensive gamble. Focusing on what your child likes and what they want to do can lead them to a career in an unconventional manner.

Consider these numbers:

If we look at 100 high school graduates, on average:

• 40 do not go to college – they go directly into the workforce or the military.
• 15 will attend a 2-year technical or trade school. 
• 45 will attend a 4-year college. Of those:
  • 10 will drop out.
  • 23 will graduate in 4 years
  • 12 will take between 4-6 years to finish college. 

Given these numbers, college just isn’t for everyone.

The Changing Landscape of Education

Attending college is not a decision that should be made lightly. It’s not a backup plan; it’s a major financial commitment. Community college, trade school, joining the military and entering the workforce are all viable options. For some students, these are a much better fit than the traditional 4-year college education.

Tuition rates have jumped significantly over the past two decades, for both private and public universities. That’s a hefty expense for a student who is unsure of what career path they want to pursue. For college students who graduate with debt, beginning their financial life can be daunting, particularly if they are not excited about their prospective job.

There have been fewer students attending college in recent years. Enrollment peaked in 2010 and has been on a steady decline, falling by almost 15 percent, some of which is driven by reduced population. Experts expect those numbers to continue to fall as students choose other avenues. 

Options

To answer my earlier question, high school graduates don’t put money toward their life’s goals because they don’t have a clear picture of what that is. Most of them don’t have enough experience to know what their direction should be. And that’s OK. Some people can see their future clearly. For others, they will find clarity later in life. 

We are seeing trade school enrollment surging, and there has been a big jump in the number of students seeking professional certificates. Apprenticeships are coming into vogue as well. The reality is that you can learn almost anything on the internet, so students can focus on very specific niche jobs. Employers are also putting less emphasis on the 4 year degree, and paying closer attention to practical experience.

It’s perfectly normal for a teenager to be unsure of their next steps after graduation, but there are so many options beyond the traditional 4-year college degree. Encourage your student to weigh all their options and take time before making a future commitment. Their career and their wallet will thank you.

Pamela J. Horack, CFP® of Pathfinder Planning LLC provides personal financial planning advice and investment management for a simple fee to young adults and working families in North and South Carolina through group classes, one-on-one planning, and ongoing advice.

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You’re used to the normal expenses such as dance tickets and apparel, sports fees, game tickets, and club dues. But, goodness, all that pales in comparison to the pressure you’ll feel left and right for the things you’ll be asked to pay for during senior year. Some of those expenses may even be mandatory depending on the school.

• Senior Pictures – formal school yearbook pictures and informal personal photography
• Homecoming / Prom
• Graduation Announcements – Don’t forget the Thank You notes and Stamps!
• Graduation Party
• Graduation Gift
• Class Ring
• Cap & Gown, tassel, cords, and stoles
• Senior Trip/Bash
• Yearbook
• Letterman jacket
• Miscellaneous Senior Gear – t-shirts, hats, keychains, etc.
• Diploma Frame
• Test fees – AP/SAT/ACT
• College Applications & Transcript fees
• Travel for College Campus tours

That’s a pretty long list that can quickly add up to thousands of dollars. Of course, your actual costs will vary widely based on your family and the high school. Some schools require seniors to purchase or rent a cap and gown, while other schools provide these for students. There may be things that families can easily decide to cross off their list as well.

Homecoming and Prom will probably be more expensive for girls than boys since girls tend to get their hair, nails, and makeup done. Guys usually rent their tuxedo while girls purchase their dresses, shoes, and accessories. Then there may be alteration fees for the clothing. Add in flowers, dinner, and a limo and these kids are getting a nicer date than I get these days.

Class Ring Expenses

I don’t believe in high school class rings! I know this may be an unpopular opinion. They hold sentimental value for many and are easily customizable to highlight your child’s high school memories, but I believe they are just a waste.

If your child attends college, they aren’t going to be sporting their high school clothing or accessories. After being worn for a short time during their senior year, those rings will likely collect dust at the bottom of a drawer or a jewelry box. I chose to not get one and don’t regret that decision, but if my child decides they really want one then we’ll have to add it to the budget discussion.

I also never hung up my high school diploma so I never needed a frame. But I did hang my college one!

Do you really want it?

The point is to really look at each of these optional expenses with your child and be realistic. Does your senior even want the item? Or is there peer pressure to get it? They don’t have to get something just because everyone else is getting it. The opposite holds true too, if they really want something.

Savings Options

Don’t forget to look for unconventional ways for things. Maybe your child doesn’t care to take senior pictures (beyond the obligatory yearbook photo), but you do. Hiring a photographer or using a studio can have drastically different costs. If that is out of reach there’s always taking them yourself or finding a photographer doing a model call. Often, you’ll only pay for the pictures themselves or a minimal fee if you agree to be a model for their portfolio.

Include your child

Be sure to include your child in these decisions. It’s a great opportunity for them to practice budgeting and planning for expenses. You could budget $75 dollars for a class ring and if they want a more expensive one then they can pay the difference themselves.

Personally, once my oldest is in high school we’ll start putting a small amount of money aside each month. Then, as we close in on senior year, we’ll jointly decide how to spend that money.

Thoughts from a Recent Grad

Donald has been in college for a year. Here are some of his reflections on his senior year.

“My Senior year experience was way different than I expected. I had planned on taking an extremely light course load and getting a full-time job somewhere working about 20-30 hours a week. As it turned out, my courses required a lot more time and effort than I thought, and I couldn’t find a job that I thought would work out for me, so I ended up with a lot of work and no money. What money I did have was used very sparingly.

I didn’t get a class ring or class jacket because I knew I wouldn’t really wear them, but I did pay for a few smaller trips and a larger one to Washington, DC. The trips were absolutely worth it! Experiences would be worth a lot more than anything else, so I happily coughed up the money. I spent a little bit on smaller things like nights out with friends for the same reason. I also spent some money on silly little things because it made for fun moments!

For Christmas, I bought a coffee maker and some coffee for my first period class to use because there were only seven of us and most everyone was a coffee person. I think the whole setup was about $35, but the fun we had with it was absolutely priceless! In short, if you’re unsure about buying a material item in your Senior year, don’t do it. Save the money for the moments you have with the people that matter.”

Be Frugal

Navigating the realm of your senior year high school expenses is a pivotal lesson in financial acumen. Before making purchases, pause and think about if you even want it—a sage strategy to curtail impulse spending. Look for budget saving opportunities that often hide in plain sight, but remember, frugality doesn’t equate to deprivation.

Allocate resources where they matter most by doing what’s genuinely meaningful to you. What expenses would you add to this list or surprise you the most? Have you found a creative way to pay for any of these expenses? What did you really care about but your child didn’t?

Thanks to Karina Moretz, Associate Advisor for this post. Pathfinder Planning LLC is a registered investment advisor in North and South Carolina. We serve young adults and working families by providing personal financial planning and asset management for a simple fee. www.pathfinderplanningllc.com

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It’s back to school time! Which means it’s also time for college students to get serious about how they manage their money. 

If you’re like most parents, you recognize the importance of starting your grad off on the right foot with a basic checking account that allows them to store and allocate their funds for different expenses as they learn how to properly manage funds on their own. 

However, choosing the right checking account is not as simple as driving down to the local bank and signing up for the option with the lowest service charge  — especially for those who have never managed money before. 

To help you make sense of it all, we’ve put together a few tips for picking an account that is right for your student and won’t break the bank!

Big Banks

The larger national banks have the benefit of name recognition and greater accessibility. You can access them almost anywhere, including nearby branches, grocery store kiosks, or on-campus locations. This makes it easy for parents to quickly make deposits and for students to access cash when they need it.  

On the downside, many larger institutions have stopped issuing free checking accounts. Additionally, ATM fees are on the rise for everyone. So, be sure to check the fee schedule to see how much the account will be charged for going below the minimum balance or for making ATM withdrawals.

Community Banks

Local community banks continue to compete favorably with the big banks. Many of these banks still offer free checking to maintain and grow their client base. There are often fewer branches, but this means that you stand a better chance of getting to know the employees. When the employees know you and form a professional relationship with you, it can be easier to transact business. 

So, if your student goes over their checking account limit, a quick phone call may help resolve the issue. Since there are not as many branches and ATMs available, community banks will often waive fees for using foreign ATMs. This helps alleviate the inconvenience factor and save money on withdrawal fees.

Credit Union

As member-owned cooperatives (as opposed to for-profit entities), credit unions may offer higher interest rates on deposits as well as no-fee accounts. As with community banks, fewer branches and ATMs often means lower fees for ATM usage. 

One caveat is that you may need to be affiliated with a “field of membership” such as a specific employer, church, school, or community.  Ask your family to see if they have a relationship that would qualify you to use a credit union.

Online Banks

Online banking began with the technical revolution in the 1980s and has greatly evolved since then. While many brick and mortar banks have an online presence, there are several FDIC-covered institutions that operate exclusively in the cloud. The lack of a physical branch system is actually one of their greatest strengths. Without the overhead, they can pay higher interest rates on checking and savings accounts.  

Most online banks offer direct deposit and no-fee ATM usage, as well as 24/7 service. The Gen Y and Gen Z crowd is used to having an internet connection, so it will also make sense for younger students who are accustomed to doing almost everything online. 

The downside here is the disconnect between money earned and money spent.  

A “new” account holder needs to see a check, make a physical deposit, write checks, and use the ATM to really understand how to budget money. If they don’t, the numbers are intangible and there is a greater chance that your student will not learn to manage his or her money well.  

When money “magically” appears in an account, it is just as easy for it to “disappear.”

Choosing the Right Account for Your Student

As your child goes off to college, whether it is across town or across the country, work with him or her to decide which services will be most important. Banking rules and regulations often change, so be careful to check the fee schedule and ask your Customer Service Representative if they know of any upcoming changes that may affect the account. 

Our society has become very accustomed to free banking services, but remember that banking is a privilege, not a right. Many banks charge fees for smaller accounts that used to be free. If all of their pizza money. 

Helping your child establish their banking relationship and giving them the tools and expectations they need will make the transition smoother as your student begins managing their own funds.

Pathfinder Planning LLC is a registered investment advisor in North and South Carolina. For more information, visit www.pathfinderplanningllc.com. 

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