Learning How to Budget for College
For many students, attending college is the first time they are on their own. It is also often the first time they have had to manage their money beyond a simple allowance. Thus, it can be a good time to teach them how to manage all that money they hope to make after they graduate. The Financial Planning Association, Denver, Colo., offers the following tips for parents of college students:
Work together. Before they head off to college, sit down with them and prepare a budget. Just the act of putting it all down on paper or on the computer will give them a better appreciation of the high cost of college and force them to think twice before spending money.
List all income sources including work-study, a part-time job, loans, money earned by the student during the summer, and/or a monthly allowance from you.
List any realistic expenses. This can be difficult to gauge before the student goes off to school for the first time, however the college should be able to provide some guidance about what it costs on average beyond the major expenses of tuition, books, and room and board. The task will be easier if the student is staying in a dorm, but even there, many overlooked expenses may crop up, such as concert tickets, late-night pizzas, and weekend football games. If the student lives off campus, there may be cable-TV and telephone bills, groceries, and much more.
Who is responsible for what? One thing you will need to determine is exactly what expenses the student will be responsible for and what you will cover. Parents commonly take care of the big bills, such as tuition and room and board, but the student will then take care of clothing, books, fees, non-dorm meals, toiletries, auto expenses, etc.? If living off campus, what expenses is he or she responsible for? Even if you kick in much of the living expenses, such as rent and groceries, the student likely will be responsible for paying those bills. Should you send money each month, each quarter, each semester? What happens if your son or daughter blows what should have been the grocery money on concert tickets?
Reconcile the differences. Subtract projected expenses from income. If expenses exceed income, either trim expenses, increase income (student takes a part-time job?), or both. Ideally, a budget for the student should be snug, but leave a little wiggle room. Students need to understand that, if they overspend in one category, they will need to cut back in another category for the month.
Track income and expenses. Students need to track all income and expenses on a monthly basis. This serves two purposes: one, it better keeps them on track to stay within their budget limits, and two, an accurate record of expenses allows for adjustments. Especially the first year, getting an accurate picture of college costs is a learning experience for parents as well as students.
Most students these days are computer-savvy and probably have a computer at school, so they might want to use a software budgeting program. The most difficult part of the budget, whether they put it on computer or paper, will be tracking cash expenditures.
Review the budget. Go over the student's expenses within the first two or three months to see if your son or daughter is staying in line with the budget. Make adjustments if they seem reasonable. Perhaps groceries or transportation turn out to be more expensive than you estimated they would. The student also needs to be alert to adjustments. If you are paying for dorm meals, but the student is skipping them and eating out instead, he or she may have to cut down on the meals out. Perhaps the next semester you can buy a smaller meal plan and allow the student to eat out more.
*Adapted from: USA Today (Society for the Advancement of Education), August, 2000