May 19, 2022
by David Blackburn, CFO
Graduation is quickly approaching for high school seniors across the country, and in a few short months many of those graduates will be off to college! Whether you have talked to your graduate about budgeting since they were old enough to count or if you are just getting started, here are some ideas to help your graduate prepare and manage their own budget during college.
Start out by working with them to identify what expenses to expect for each semester. Tuition, books, housing, dining, and transportation are some of the more common expenses. Be sure to take into consideration any other expenses that might be incurred such as additional specialized supplies that could be required for certain majors or additional expenses that could be encountered depending on the location of their college. Now is the time to discuss how much should be set aside for discretionary expenses such as movies, sporting events and other forms of entertainment for when your college student needs a break from studying. The budget may also need to include setting aside some funds for longer-term goals, such as a spring break trip.
Next, determine in advance who will pay for what and what sources are available to pay for those expenses. Your student may have a college savings plan, such as a 529 plan, or they may have scholarships, grants, financial aid, or other savings to help cover some of the qualifying expenses. If a shortfall exists between the expected expenses and the sources your student has available, who will pay for the difference? Will mom and dad be providing some financial assistance; will your student need to get a job, or a combination of the two? If parents are providing financial assistance be sure to set a designated day each week/month for the deposit or transfer to occur.
Afterwards, have them put the budget on “paper” so they can track and manage their budget. They can either build a simple spreadsheet or use one of the many available budgeting tools or apps to document and track the budget. Just make sure it’s in a format your student can easily reference along the way, but don’t make it too tedious. They will have enough to keep them busy in college without making budgeting a burden.
Finally, be sure to re-visit the budget with them periodically, such as at the beginning of each semester. Circumstances change over time. Expenses can increase, college savings can run out, scholarships may not cover all four years. Adjustments may be necessary.
Now that we have covered the basics of budgeting, here are a few more related tips to help your college student manage their budget and finances:
- Use a low balance alert on their banking application to alert them when they are getting low on funds in their bank account.
- Consider turning off overdraft protection on their checking account while they get accustomed to managing their own finances.
- Remind them to watch for student discounts at local retailers, and have your student get in the habit of asking about student discounts.
- While there can be benefits to having a credit card for building credit and for emergency purposes, credit card spending can be counter-productive to budgeting if not handled properly. Most students will not qualify for a credit card on their own so if you assist your student in opening a credit card make sure it’s managed responsibly.
- Students are at a high risk for identity theft, so remind your student to protect their personal information. Passwords should never be shared, not even with a friend, and their Social Security Number should only be provided when absolutely necessary. Even leaving personal information lying around the dorm room can pose a risk for identity theft. We certainly don’t want your student to experience the distraction, hassle, and cost of dealing with identity theft.