This is when a lot of kids begin handling all of their own daily expenses for the first time—and when they may be tempted to overspend—without parents close by to watch over them.
Here are some ways to work with your child on college budgeting:
1. Talk about who pays for what. Even if you only help your child out with some college expenses, set ground rules. For example, you may be willing to pay for food, but does that include pizza outings and coffee stops or just the meal plan that may be offered through your child’s dorm? Is your child on his or her own when it comes to clothes? Who pays for school-related expenses such as printing costs? The clearer you are now, the fewer misunderstandings you’ll have later.
2. Help your student determine his or her college “income.” If your child works on campus, that may be a simple way to determine how much he or she can spend each month. For example, if your son works 10 hours a week at a minimum wage job paying $7.25 per hour, he’ll earn $290 per month before taxes, or around $250 after taxes. If you’re providing a stipend, be clear about how much you’re willing to dole out every month. Now’s the time to explain to your college student that this is how much he or she is able to spend each month—no more. You’re prepping your child to be completely financially independent.
3. Review college estimates for personal expenses. If you’re not sure what’s reasonable for a college student to spend monthly, check out the College Board’s online net price calculator or look at your financial aid award form. Most colleges provide “guesstimates” of what attending students will spend on basics like toiletries, clothes, and entertainment. It’s a good starting point.
4. Map out expense categories together. Every college student’s expenses will be a little different, but some basics are books, clothes, personal supplies, entertainment and eating out, gas and insurance (if your child will be bringing a car), and school supplies. The key here is that the money your child budgets into each category must add up to no more than the income amount you determined together in step 2. This is usually the tough-love part of the process as your child realizes that he or she has a lot less to spend than initially expected.
5. Choose a budgeting tool. My daughter is using a program called You Need a Budget that she can access on her computer and phone. Other options: Mint.com, Dave Ramsey’s EveryDollar, or a computer spreadsheet. Whichever method you and your college student choose, encourage him or her to plan a budget in advance, before the month starts. Start with your child’s income amount to determine how much he or she can budget into various spending categories.
6. Remind your child to include cash, debit, and credit card purchases in the budget. It all counts. If your son withdraws $60 from the ATM, he needs to enter it in his budget and categorize it—possibly using multiple categories. If he buys books online using a debit card, he should enter and categorize that purchase right away as well. And any credit card transactions need to be part of the monthly budget, too.
7. Encourage smart habits. Kids who use electronic budgeting tools may stay on top of their tracking better if they use a related smartphone app and log their purchases immediately. Otherwise, encourage your child to record his or her spending at the end of each day or week. The more regularly your child reports their expenses, the better.
8. Check in. Learning how to budget takes some time. Check in with your child regularly and ask for budget updates. You’re not butting in; you’re coaching your child in good money management. Holiday breaks are a good time to take a look at the budget together while you offer feedback, help fix snags, and ask your child how he or she might handle money mistakes differently in the future.
Remember this: Your job isn’t to micromanage your college student’s budget,it’s to slowly turn over the reins. Be sure your conversations are calm and respectful and that they come from a place of teaching rather than judging. After all, you’re dealing with an almost-adult now.
Teri Cettina is a personal finance and parenting writer/blogger. Prior to becoming a freelancer, she was an employee communications writer and editor for a large regional bank. Follow her on Twitter: @TeriCettina
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