New Podcast with Marci Grossman

Hi, this is Shellee Howard with College Ready coming to you again on our podcast, Parents, Is Your Teen College Ready? Looking forward to speaking with Money Marcy today as we talk about financial literacy, about all things money. So let me tell you a little bit about Marcy. She is a second-generation accountant, which is fascinating. Because most students don't want to do what their children or what their parents are doing. She started doing bookkeeping work for her father at about age 14. She would work on columns on worksheets, and she ended up going to MSU and got her degree in accounting, becoming a CPA and working in public accounting for years, both with a firm and on her own. During that time, she also did freelance writing for a variety of publications, including online accounting publications. Most recently, she has a book called Money: Marcy's Guide to Financial Literacy. And I am super excited to introduce our guest. Welcome to the show, Marcy.

Thank you for having me, Shellee Howard.

My pleasure. So today I'd like to talk a little bit about how we can help prepare our teenagers. This show is all about helping parents to help their children. And so as we look at having money conversations, when is the best time to get started?

Well, I would say at the point in time where they start having money of their own to spend, which might be when you start giving them allowance or chores, uh, money for chores, probably around age 5, I would guess. Um, and, and they have money on their own. Let them make mistakes so they can learn from them. If they spend it on candy, then they don't have enough for a comic book or for something else. And, and that's how you learn that it's a limited resource. Yes.

And then of course, money is kind of a difficult subject when you start talking to your teenager because in their mind not all of them understand the value of a dollar. I play this game with my clients called, if I gave you a million dollars, what would you do with it? And it's quite amazing how many yachts and airplanes and, and things that will be bought. And so how do you, uh, teach somebody the value of a dollar when it comes to mapping this out for somebody young?

So the younger you're talking, the smaller dollar amounts you're speaking about, and so you write it down and you do it as a math problem. I have $5 and I want to buy these things that cost $50. What's most important and how do I get there? But it is a lot of math problems.

Okay, so You know, starting at the age that the, the child's mature enough to understand the concept obviously is important. And, uh, preparing them. When should you start talking about the big money, the college loan or debt that we want to stay away from?

Well, as soon as they have a job of something more significant than, than a few bucks a week. You can, you can have them open up a savings account and have them start putting away money, whether you set a dollar goal per week or per month or a percentage because they're making more money than they need, where they can understand and they can start seeing it grow. If when they, when they get to be, let's say, 10 or 12 and they are babysitting or mother's helper or whatever it is where they're starting to earn a little bit more money, A lot of mutual fund houses will allow small investments as long as they're seeing something consistent, and then you can really start seeing growth on that money because you're investing it in stocks and more aggressive investments than just putting it at your bank. It really depends on the family as to what you expect the student's percentage of their high school— of their college money to be versus what the parents or grandparents or, you know, the gifts, or depending on your situation, whether you're looking at scholarships or grants that may be coming in to assist in that college funding.

So important. So we, we teach at College Ready that there's the academic fit, the social fit, and the financial fit. And when I ask families to rank them, oftentimes the student will say social, academic, financial, and the parents will say financial, academic, social. So is there an easy way to reach this common ground when you're speaking to your teenager about college loans or even paying for college?

Well, it's something to, you know, it all goes back to the math of it, of course, to say, okay, you've now graduated college and you're ready to move out of the house. What you can afford now or the car you can afford to buy is all going to be dependent on obviously what you earned but also what you owe, because the more you owe, the longer it's going to be before you get the benefit of everything you earned. I tell people that spending a year or two at a community college or at a college that you are commuting to can save you $20,000 to $40,000. I mean, that's a significant chunk of change for someone who the financial is a bigger struggle for.

Sure. Yeah. And so we teach about grants and scholarships. We don't talk much about loans because we really go after the big money of picking the right college and getting them to pay the tuition. And as we help families to decide what is best for them, there's so many ways, right, that people can save. There's so many ways that they can prepare financially. But when I ask a student, um, what, you know, why did you pick this school? And they will say, I don't know, the location. And there's nothing that has to do with— they have no concept of how much that will cost. And I asked them, well, how long do you want to work for free? And they're like, what do you mean? I don't want to work for free. And that's a big conversation right there. And then I, I, I asked them, well, how will you do this? And oh, my parents are going to pay. And I said, well, how long do you want them to work for free? And so the concept of that large amount of money, how can we get them to grasp what that's going to do to their future. Is there a math problem that they can do to understand that compound?

Well, certainly you can, you can do the math. I have worksheets on my website for showing the growth of income. I probably should put some up for showing if you have loans. That's a great idea, and you've now given me some homework. They basically work in reverse, is that if you have a $20,000 loan and you're paying 5% interest annually on it, and you're only paying so much in principal depending on how long you're paying it for, it goes for a long time. And you have to understand that. But I think it also helps if parents can tell their kids, okay, I'm giving you $10,000 for college or $50,000, whatever the amount is. Tell them, I'm giving you this. Per year, or in total, this is what college is going to cost. And these are the extra things you're going to want to buy while you're in college. So college costs, you know, this much, but you're going to want to go out with your friends and have pizza, you're going to want to go when a great player, a great band comes by, you're going to want to go and have these wonderful experiences while you're at college. And there goes your new car. There goes buying a house as opposed to living in an apartment. Sure. There goes the fancy trip you want to take. You've got to make these choices, and sometimes it is a matter of putting it out on paper or on a spreadsheet on the computer and saying, "This is the cost we know there's going to be. We estimate books are going to cost this much. If you're going out of state to college, there's going to be extra expenses for that as well as traveling back and forth," and when you do it, you've got to do it as a budget and say, "Okay, These are all the things I know about, and I know there's a whole bunch of things I don't know about. And add those to— if you join a sorority or fraternity, those take a lot of money.

Sure, absolutely. So what I'm hearing you say is it's more than just tuition that the family needs to be budgeting for. So we run the family through a calculating, um, we have, have them put in their, uh, finances to get their expected family contribution. So they have a really good idea about if they don't get any grants, if they don't get any scholarships, this is going to be the foundation. And now there's more on top of that. And so when you put it on paper, I think it becomes more real. And so picking colleges that have a good academic fit, social fit, and financial fit Knowing that before they apply puts them in the driver's seat. Would you agree?

Oh, absolutely. And then you say, this is the family's contribution, and the parents can say, and this is how much I'm doing, and the rest is yours.

Hmm, interesting.

Or get the college to give it to you. And I'm sure you're well aware that you look at the tuition amounts for a private college and they're like, oh my gosh, that's twice as much as a state college, but they have so much they give in scholarships that all of a sudden a private college might become way cheaper, especially for a child that may not be in financial need but is a good student, because those, those colleges have a lot of merit-based scholarships.

Sure, absolutely.

And you have to remember, you've got to fill out that FAFSA every year, even if it's just merit-based merit-based scholarship because the colleges want to— just, they want them.

Yeah, they want to know where they're putting their money for sure. Now unfortunately, I still get calls from families who maybe called me a little late, like after they accepted a school, and they'll say, we have no idea how we're going to pay for this. And it makes me very sad, but it's a reality. For that student who said yes and the parent who says, "We'll figure it out," what are their options at that point?

Well, uh, get that FAFSA filled as early as you can. It comes out October 1st. Get it filled out, get it filled out correctly. And, uh, because a lot of these colleges It's a first-come, first-serve on that money. Make sure you take care of every scholarship and grant you can apply for. One of my sons went to a local private university and there was a scholar— competition scholarship day, or you write an essay and if they like your essay, then you come in and you did another— you did a math set of some kind, and and based on how you did on those two things, they gave you more money. Even if you didn't do great at either of them, just for participating in both of them, they gave you money, so don't ignore those opportunities. Well, it's not a huge amount of money or it's not whatever. You make the time and you do it because the colleges want to see that and they will reward you for showing up.

Good advice.

And that all adds up.

Sure. We often tell families that figuring it out later or not planning for the inevitable is a dangerous plan because then they're going to pull from retirement or they're going to do some things that may not be good for them long term. So we're big advocates of planning ahead and strategizing, and that's how our students earned over $10.7 million in scholarships last year. For the family who didn't plan and now they're forced to take out a loan, can you help them understand the difference between subsidized, unsubsidized, or grant or gift or scholarship?

So I have a whole chapter in my book explaining all of the differences of those. Because they are different. Grants are typically need-based and through the government or the university, and as long as you meet their requirements, which are probably being a full-time student and potentially maintaining a grade point, those might be automatically renewing every year, so those are huge. Scholarships, can be either need-based or merit-based, and they're typically through the university or independent organizations either associated with the university or associated through your family's job or activities that you're involved in. I mean, scholarships can come from everywhere, and Those also typically don't need to be repaid as long as you meet their requirements and, and often are renewable every year if you maintain that grade point and, and the full-time status. Loans are where it gets complex because there are the subsidized and unsubsidized loans. There are the loans that the parents get versus the loans that the students get. And also getting loans that are totally outside of the educational system by going to the bank and, and getting, uh, basically a freestanding loan. So the loans that you get that are through, through the schools are— you don't really start making payments on them until after you've graduated, 6 months usually to get you on your feet. And if it's subsidized, then that means you're not paying interest until you're paying the loan, and that's huge. And with everything we've gone through recently with COVID where loans were put on hold, if you had a subsidized loan, they even stopped the interest for those, I believe. And if it's unsubsidized, you really start owing interest the moment you take that loan. So you want to, you want to take as much subsidized as you can. And as least of the unsubsidized as you have to. Now they've just got these programs going where, where some loans are going to be forgiven, and then of course there are the stories out there of people who compiled their loans into, into one grouping, and now they don't have the opportunity to apply for that. And then there's a matter of, of who's on that loan. So if a parent takes a loan to help the student, they can't transfer that loan to the student. That loan is the parent's responsibility. And if the student says, hey mom, I'll pay you back because that's all I can get, that's between you and your child. There is no, there is no legal course of action you can take to get them to pay you back. I, I tell people you don't want to hit retirement because your retirement money You can't make that up. If your student made a choice and they are going to have a big loan and you want to help them pay it off, you know, when the time comes by writing them a check or writing a check right to pay the loan, that's great. But you don't want to skimp on your retirement because that opportunity isn't going to come around again for you.

Maybe you can speak to— I hear this often where the student believes they can take all of these big loans all by themself and yet they're 17 or 18 years old with no collateral. So what are the chances of that happening?

They will get their loans through the schools and the universities, but they won't be able to get an outside loan. I mean, not without getting someone to co-sign them, and then that puts the parent on the hook again, which they may or may not be willing to, to, uh, be. That's, that's a choice they have to make. I can't tell anyone what to do or not do. But I, I can say I understand that you want what's best for your student, but, uh, you know, if, if money is, is the issue, really look at the early college programs that delay your graduation a year but give you your first 2 years under your belt. And leave you available for all of those other scholarships and grants that can come around for you.

Sure. Yeah, often, you know, yesterday as a matter of fact, I had a potential client call me. They're not our client, and she wanted to know how she can legally hold her child accountable for that loan. And my eyes got big like yours, and I'm like, uh, one, are you going to take them to court? What, what, what are you going to do legally to them if they don't pay you back? Because that's number one question, right? Could you follow through? And she said, no, but I wanted it. I wanted them to learn the, the reality, the what they're signing is legal, and so on and so forth. And, you know, she's like, do I need to hire an attorney? And we I said, "Well, are you going to take your child to court? If that's what you think you're going to do, be very careful because that's not a good investment." And she's like, "Oh yeah, that does sound kind of awful." And I said, "I understand the lesson that you want to share with the student that this is a real important decision." but I don't know if you need to go the legal route if you're not planning to follow up. So is there any advice you can give that parent to, yes, support their child, but thinking it all the way through how to best set the child and the parent up for success?

If, if your child is going to a university where what you can afford to give them and what they are likely to get in scholarships and grants, and potentially the loan that they can sign for on their own isn't going to be enough, then you've got a problem, and you guys really have to sit down and figure that out. There is— I guess after your student turns 18, depending on when their birthday is, you could sign a legal document, and maybe that would be enough to get their attention to honor it or make good decisions, or maybe they're going to be 18 years old. I mean, we all were young once. We all survived it, and hopefully our parents did too. But you have to draw the line and you have to be the parent and say, this is what I've got, this is what I can do, and I'm not going to cross that line and co-sign a loan for you that I can't afford. I'm not going to give up my retirement in the hopes of what may or may not be, and depending on whether the gap is something they can make by a part-time job or finding some other source, spending their whole summer trying to pick up all the scholarships that might be out there. You know, if you're not willing to take on that debt, and you shouldn't take on debt you can't afford, and your child can't can't qualify for that debt on their own, then you've got to have a tough decision. And I don't know what the consequences might be of a late change of college, but, uh, it's not worth mortgaging your future, not yours and not your students.

Yeah, great perspective. So I know you've written a book. Can you share with our listeners how they can get a copy of this and find out more about it?

Sure, my book is available on Amazon. It's Money Marcy's Guide to Financial Literacy, and Money Marcy is one word, M-O-N-E-Y M-A-R-C-I. And usually if you type that in, that should be enough to pull it up. It's a pretty little book with pictures of money on it to make it easy. It is written I would say for ages 15 to 25 was my target audience, but for anyone who wants to understand more about money, we have chapters on budgeting and on the difference between scholarships and grants and loans and how to reconcile different types of accounts, a lot of basic money tools that people need. And I have worksheets available on my website. I'm going to add that loan amortization schedule. That was a great idea. And, uh, and, um, I post regularly topics of money that, that come up that interest me or that someone says, hey, could you tell me a little bit more about? And, and I love to have those suggestions because it's something someone wants to learn about, and, and I enjoy the opportunity to explain it.

Well, thank you so much for being our guest and for sharing your wisdom. We will put your contact information and book inside of our show notes. So thank you for being here. We really appreciate it.

Well, thank you for having me, Shellee. I, I enjoyed this.

You're welcome. Bye for now.

Bye.