How to Teach College Students to Budget
Here are 4 tips to help your college student create a budget, manage expenses, and spend responsibly.
Teaching kids about money management starts from a young age, however, it becomes far more prevalent as your children enter adulthood. If your child is getting ready to attend college, you and your co-parent should take some time to talk to them about budgeting. Once you and your co-parent have coordinated the logistics of how to handle your student’s tuition, housing, groceries, books, etc., it’s time to bring your child into the conversation.
This may be the first time your child is managing a budget on their own
Remember, even if you’ve discussed money management with your child before, handling a budget all on their own is a big step. If you and your co-parent expect your college student to pay for a portion of their tuition, other school fees, rent or dorm expenses, or grocery bills, those expectations should be set up front so your child can be given a clear expectation of their financial responsibilities. Once your child is aware of what they’re expected to pay for, it’s time to help them budget accordingly. Here are 4 tips to help your student create and stick to a budget in college:
1. Help your child figure out how much money they have to spend
Whether your child’s money is coming from a job, scholarship, allowance, or savings account, they must figure out their total earnings (either weekly, monthly, or yearly). Once that total is tallied, your student should subtract their share of estimated costs for essentials such as tuition, housing, books, groceries, etc.
After essentials are accounted for, your child can clearly see how much money they will have left over each week, month, or year. This will help give them an understanding of how much money they have left to spend on non-essentials and saving, making it much easier to plan their budget from the get-go.
2. Give your child college-specific budgeting advice
Many college students suddenly have freedoms that they’ve never experienced before, such as choosing and paying for their own meals, taking care of their own transportation and associated costs, and participating in activities or trips with friends that they must pay for on their own. It’s important to talk to your child about the financial weight of these freedoms and how to spend responsibly.
Encourage your college student to cook and eat at home or use their meal plan whenever possible. Explain that they may need to factor gas, car maintenance, and car payments into their budget if they plan to drive a lot. You also need to give your student practical advice when it comes to outings with friends and explain the financial benefits of choosing to participate in free or low cost activities. Encourage your child to look for campus-sponsored events and deals that could help their entire friend group save money.
3. Make sure your child understands the pros and cons associated with how they spend
Many college students open up a checking account with a debit card or they get a credit card. Debit cards are a great way to ensure your child only spends what they have, and it teaches self-discipline when it comes to money. However, it’s important for your child to understand that they must keep track of how much money is in their account at all times, so they don’t accidentally overdraft their debit card.
If your child decides to get a credit card, it’s crucial to make sure they understand how to use it responsibly in order to avoid hurting their credit score and/or going into debt. Credit cards are a great resource for college students should they encounter an emergency or an unexpectedly large fee, however, they need to know that these flexibilities should only be used when absolutely necessary.
4. Explain the importance of saving to your child
Your child is never too young to learn about saving, but as they get older, it’s important to explain the real-world benefits to your kids. Talk to your child about the situations and/or emergencies that could arise during college and how a savings account will be a life saver under certain circumstances.
This is also a good time to get your child thinking about their future and the expenses they’ll encounter after college. It’s not too early to discuss things like purchasing a house, buying a car, and paying bills. It’s important to help them understand how a healthy savings will come in handy throughout their adult life and why it’s a good idea to start saving now.