Every parent has reluctantly accepted this universal truth: children and money go together from day one – from diapers to bicycles to music lessons and everything in between. Now they’ve grown up – so to speak – and they are heading off to college. Gone are the days of saving allowance for the candy store or a trip to the movies. It’s time for a real budget as they step out into the “real” world.
So it’s your mission as parents to have the financial responsibility talk and have it soon. Even if they’ve already opened a checking account in high school, college may bring a whole new set of financial issues. Launch the conversation by sitting down to map out a realistic budget based on what resources your child will have available: financial aid from school, earnings from a part-time job on campus and any contributions from you. If your student will be living in a campus dorm, he may only be responsible for personal expenses. But if he plans to live in an off-campus apartment, rent and utilities will also be a very grown-up part of the monthly plan.
Let’s face it – a hefty disbursement from financial aid or scholarship money can be challenging for a college student to manage. To keep their budget student-friendly remember that college students’ lives revolve around semesters. Guide them in planning a semester budget where they space out spending, limit dining out to special occasions and strive to have enough money left over by December so that stressful exam time doesn’t also mean scrambling to buy groceries. If they’ll be living in an apartment, encourage your student to learn enough cooking basics to prepare simple, inexpensive meals – beyond the ever-popular Ramen noodles!
This is also the perfect, although sometimes painful, time to have your student acknowledge the difference we’ve all learned as adults: needs versus wants. Identifying what’s really urgent, as opposed to the allure of a new video game or a fabulous pair of boots, is the first step to standing strong on the budget front. Teach them the importance of an “emergency fund” and keeping careful track of bank accounts. When it comes to finances, ignorance isn’t bliss, and not accounting for spending for several weeks at a time can lead to an unpleasant surprise at the month’s end and even worse – unnecessary service charges for an overdrawn account.
Although it’s a scary thought, this is also the age when young adults can apply for their first credit card. Students over the age of 21 may qualify for a low-limit card on their own without a parent co-signing, and although a credit card can bring great peace of mind in an emergency situation and can aid your college student in building their credit portfolio, there’s a downside to unlimited credit. For many parents the “credit card conversation” can be rooted in personal experience and can be one of the most valuable lessons you ever teach your child! The best advice: only charge what you can pay off at the end of each month. Period.
One last easy-to-forget piece of advice: if your college age child is studying out-of-state, don’t forget to add transportation home for holidays to the financial budget!