Is Your Student Budget-Wise?
Your child may soon be ready to take his or her first step on the journey toward independence: college enrollment. Cautionary words about life away from home have all been spoken. However, one area that many parents may overlook or hesitate to bring up with students amid the excitement and chaos of preparing for college is personal money management.
Typically, students do most of their day-to-day spending on a spontaneous basis, where overspending is the norm, rather than the exception. During a school year, the average college or university student will spend nearly $5,000 for books, supplies, transportation, and personal expenses while at school (Trends in College Pricing 2012, The College Board). However, there is often room for economizing, and the first place to look is food and entertainment, especially when ordering pizza with a smartphone is just a “touch” away.
Sooner or later, the conversation about living arrangements takes place. While many students believe it costs less to live off campus than in a dorm, they may be misinformed. In college towns with a high demand for off-campus housing, accommodations within walking distance of the campus can be expensive. Some landlords may require a one-year lease—a period longer than the school year. If a student does choose to live off campus, he or she can save money by sharing housing and eating in. There are steps you can take to help your student understand the financial picture. Consider the following:
Before your child leaves for college, sit down and discuss both of your expectations.
Explain when checks or money transfers can be expected, the amount that will be received, and any rules concerning use of the funds.
Consider providing a lump sum each semester, with guidelines on how long the money must last, and allow your child the freedom to make day-to-day financial decisions.
Whether students rely on parental subsidy, use their own money, or combine funds, most have savings and checking accounts. Therefore, it is important for them to know how these accounts work. Their ability to balance an account and spot any errors is important. Many undergraduates tend to keep their checking accounts in hometown financial institutions. However, managing finances long-distance can create challenges. Verifying a balance quickly with an out-of-state bank can be difficult and time-consuming. In addition, trying to get money to college students in different locations can be frustrating. Even with the convenience of online banking, it may be a good idea for your child to open a smaller account on or near campus.
While some parents may hesitate to promote the use of credit cards, especially for a student who has difficulty managing money, others may believe a credit card can help provide a useful backup, especially in an emergency. A credit card can be helpful for car rentals, plane fares, and train tickets. Ideally, college students will be able to take full responsibility for each semester’s spending. Life becomes easier for parents whose college-age children can manage their own finances, and students can learn valuable life skills in the process.
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