College is expensive. Both parents and students know that they are investing a lot of money in a college education. Some families have pieced together significant scholarships, grants and loans in order to pay for a college education. This post is not about those bigger financial issues that make a college education possible. It is about helping your student create and live by a daily budget for his living expenses. Whether your student must pay for his own expenses, or whether you partially or fully fund his expenses, college is the ideal time for your student to learn to manage his money carefully.
Working together with your student to help her establish a budget may provide an opportunity for you to talk with her about her priorities, her needs and wants, her interests, and her goals. You will get to know your student even better. You will be helping her to establish an important skill for after graduation, as well as helping her to understand where her money goes now. She may already understand, or she may be surprised to discover, how quickly little expenses add up. Your student's budget will be more and more realistic each semester that she spends at college as she learns what true costs are and what opportunities she may have to save. If she is just starting college, her budget may be only an estimate and she will need to be flexible.
Thinking About Budgeting
Hopefully, your college student will be interested and willing to work at setting up a budget. If he resists, try to insist. Help him understand the importance of understanding where his money goes. Convince him that if he wants or needs more money, or more independence, later, then he will have a more solid argument if he can demonstrate his spending responsibility. Creating a daily budget is another step toward the responsible independence that both you and your student seek.
Help your student decide whether he would like to set up a yearly, monthly, or semester budget. A semester budget may make sense since expenses vary at different points throughout the semester. Agree to create a budget of living expenses that does not include tuition or set-up costs such as dorm room or apartment furnishings. This should be a budget of the daily costs of living once your student is established.
Remember that your task is to get your student started and to help her determine realistic costs. However, this is your student's budget and she will need to live with it. You may or may not agree with her priorities, but she will need to make her decisions. In order for the budget to be livable, your student will also need to be honest and realistic about her expenses. This means that she will need to include all of the things that she spends money on – including, perhaps, alcohol or smoking or other entertainment. Once you get her started, there may be a point at which you, as parent, need to step back and let her continue. As difficult as this may be, it is part of her growing independence.
Creating a Budget
Help your student think through the basics of a good budget. What are his sources of income? Does he receive money from parents – each semester, each month, each week? Does he have savings from a summer job? Does he have a job on campus? Does he receive scholarship money for expenses? Are there any other sources of income?
Help your student think about his expenses – both fixed and flexible. Don't include room and board unless your student lives in an apartment and has those expenses monthly – and if he is responsible for them. The idea is for this budget to cover those expenses over which your student has control and responsibility. Your student may be surprised about how many expenses he actually has – food (other than meal plan), entertainment, cell phone, textbooks, sports events, movies, car expenses (including campus parking tickets?), travel expenses, fees, emergencies. This is where your student needs to be honest – with himself – about the things on which he spends his money. He may need to continually adjust this for a while as he discovers and remembers new things. Obviously, if the budget won't balance, he'll either need to increase income or reduce expenses. It may be difficult at first for him to see where he can reduce his expenses. He may have a difficult time realizing, and admitting, that he may need to give up some of his activities. Recognizing that there is a finite amount that he can spend is sometimes difficult.
There are many budget worksheets available to help you and your student create a budget. You may find it most helpful, however, to create your own. Consider creating an excel spreadsheet, or just use pencil, paper, and calculator. The important thing is that it be as accurate as possible and that your student be able to keep it up as she goes through the semester. If you choose to use a pre-made worksheet, there are several options available at moolanomy.com. You may find one that works for you.
Staying on the Budget
Creating a budget is one thing, sticking to it is another. Anyone who has ever tried to live on a budget knows that the plan is the easy part. Making the budget realistic helps. Being motivated helps. Seeing the process as a positive experience and an experience of learning about yourself and your priorities helps. One writer has suggested three traits that are necessary to make a good budget system work: a positive attitude, motivation, and being realistic. (Read the full article here.)
The work of staying on the budget will be up to your student. Agree together about a few basics.
Creating and sticking to a budget takes honesty, discipline, and hard work. However, it is a useful way to feel in control of spending. Your student may or may not increase his income or decrease his expenses, but he will know where his money is going, and he will feel more in control. Working with your student to help him create his budget will open new doors of communication and understanding between you. Keeping it all as a positive experience is important for you both.
Excerpted from College Parent Central