What You Don’t Know About Your College Kid

This week I invited a group of students who are in university to come to my office to have a general chat about money in preparation for a course that we are launching targeted towards that age group. It must have been the most interesting conversation I have had this year.  This article is targeted towards the parents of this age group.  As you go around with your daily activities and business, you may not be aware what your college or university going child thinks about money.  You may not know how what you do impacts on what they believe about money.  You may not know what they will do with their first salary.  You may not know what kind of peer pressure they are facing. You may also believe that the fact that they have made it to university or even the fact that they are studying a business related degree should prepare them for their financial lives going forward.  I didn’t know before this amazing conversation.  Here is what I learned.

1. Your children are probably using HELB (Higher Education Loans Board) money to party and buy clothes.  According to a rough estimate from one of my guests that day, 70% of people who use HELB do not use it for the correct reason.  Most do not understand that it is a debt that will bite them immediately they finish campus. Right now they just see it as extra spending money.  One of the participants in this group was on internship with a particular organisation.  From her internship allowance a full four thousand shillings monthly is going towards repaying this loan.  After partying with the money she found out she owed Kshs 120, 000.  So for many of your children, their lives after university will probably start on debt.
2. The key motivation for money is to spend. This may not be much different for many of us who are older as well.  However they are developing an image driven lifestyle even before they are earning money of their own.  Apart from partying, they want to have the latest phone and the latest clothes. They want to be viewed as ‘cool”. Where they spend the money is just as important as how much they spend.  It is not enough to go out and have drinks, it is equally important how much you are seen to be spending when you are out and where you are seen to spend it. The pressure is very high for college men, who have to throw a drink or two to the girls. The sources of this spending are allowances from you, HELB as I have mentioned. Though most receive moderate/adequate allowances, there are some who receive allowances that exceed most people’s salaries.  If your college kid is female there is intense pressure to get a “boyfriend” who will fund this lifestyle. Marital status of the “boyfriend” is not a deterrent.  If you think your college kid is different because they have a side hustle giving them some income as they study, think again.  Yes they may make additional income but the motivation is still to spend. In that regard they end up in the same financial situation as those who are not pursuing these ventures.
3. You may have built a career in the banking of financial sector. Your college kid may even be doing a business related course. That does not mean they know what a bank account is and what purpose it serves (apart from receiving HELB funds). If you left them with a chequebook they may not know how to fill it.  If you sent them to the shops they may swipe the Credit Card instead of the Debit Card and not know the difference.  How the banking and financial systems work remains a mystery to them.
4. They want to earn a net salary of Kshs. 70, 000 in their first job.  Of course this is driven by the urge to spend and live a certain lifestyle in the name of conforming to an image.  But interestingly enough this pressure to go earn a huge salary on day one of their careers has also come from you. Firstly they want your approval and validation and they do not think earning Kshs 15, 000  – Kshs 35, 000 per month will cut it. Have you valued they money they will earn before experience they will gain? They are also those parents who have laid down the list of bills that will now be borne by your dear college child once they graduate – medical expenses, upkeep, groceries etc. After all it’s time to get your “return on investment”. This pressure may make them turn down significant opportunities.  We asked and many confirmed that they would turn down what they perceive as a low income even though it offers growth and exposure in the name of waiting for the one they perceive as a high income.  The one that will enable them to live a great lifestyle and please you.  In the same token they also believe the first car they buy should cost around one million shillings.

These are just some of the key points that came out.  I trust you will read them and start having honest conversations about money with your college kid. I trust you will also look at how you may have influenced their thinking about money both positively and negatively. The good news is they want to learn and they are willing to be challenged and shown something different as long as you have the conversation in a language that they can understand. Do not talk down to them. Share with them your process that got you to where you are today (mistakes included) and do not just glorify the material niceties of your current destination. I start teaching your children this week and looking forward to the journey.