Budget basics: Create a spending plan with your student
By Judy McNary
When students leave for college, they have more independence. With independence comes responsibility. College is the perfect time to master the life skill of budgeting.
Each family has its own set of values and financial constraints but, regardless of whether you plan to pay the full cost of your student’s college, part of it, or none at all, make a point to sit down together to create a budget.
Start by making a laundry list of all possible expenses.
Include anything and everything from textbooks to club memberships and the occasional haircut. Cell phones, gas, and campus parking permits might be appropriate, too. If your student is in a dorm, housing and meals are covered for the most part, but make room for those late night pizzas and the occasional meal off campus. Lastly, include savings for emergencies. The key to financial success is to spend less than you make, so including savings in the budget is the start of a good lifelong habit.
The next step: assign dollars to each budget item.
Estimate the cost of each item over the course of the whole term. Costs vary widely from one campus to another, so it’s up to you and your student to come up with numbers that fit his environment.
Once you’ve tallied the expenses, look at the funds available.
This might be from the accounts you have earmarked for college, funds your student has saved, the financial aid your student has received, or a combination. If the costs are less than the funds available, great! If not, you need to whittle away until you have balanced this budget.
Help your student set up a system for tracking.
Keep in mind that what works for one won’t necessarily work for all your offspring. If you’ve got a future accountant, one system might be ideal, while a different approach will work better for your free spirit. There are terrific software tools available including Toshl Finance (www.toshl.com — it’s free), YNAB (www.youneedabudget.com), and Left to Spend and Pocket Budget (both available on iTunes). Your own bank may offer online tools, or your student can keep track of everything in a good old spiral notebook.
Decide how often funds should be released.
For the first semester or two I recommend monthly. Making mistakes is part of learning to budget. Starting by mastering monthly budgets means no one is going to starve. Plan to check in after a month or two. Budgets quite often need adjusting!
When we make the effort to communicate financial expectations up front, we help our students acquire valuable skills that will contribute to their financial success wherever life takes them.
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