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 article 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 their living expenses. Whether your student must pay for their own expenses, or whether you partially or fully fund those expenses, college is the ideal time for your student to learn to manage money carefully.
Working together with your student to help establish a budget may provide an opportunity for you to talk with them about priorities, needs and wants, interests, and goals. You will get to know your student even better. You will be helping them to establish an important skill for after graduation, as well as helping your student understand where their money goes now. Your student may already understand, or may be surprised to discover, how quickly little expenses add up. Your student’s budget will be more and more realistic each semester that they spend at college as they learn what true costs are and what opportunities they may have to save. If your student is just starting college, their budget may be only an estimate and they will need to be flexible as they fine tune.
Thinking About Budgeting
Hopefully, your college student will be interested and willing to work at setting up a budget. If they resist, try to gently insist. Help your student understand the importance of knowing where their money goes. Convince them that if they want or need more money, or more independence, later, then they will have a more solid argument if they can demonstrate that they are spending responsibly. Creating a daily budget is another step toward the responsible independence that both you and your student seek.
Help your student decide whether they 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 them determine realistic costs. However, this is your student’s budget and they will need to live with it. You may or may not agree with your student’s priorities, but they will need to make the decisions. In order for the budget to be livable, your student will also need to be honest and realistic about expenses. This means that they will need to include all of the things that they spend money on — including, perhaps, alcohol or smoking or other entertainment. Once you get your student started, there may be a point at which you need to step back and let them continue. You may need to let your student know that you will not ask to see the final product. As difficult as this may be, it is part of growing your student’s independence.
Creating a Budget
Help your student think through the basics of a good budget. What are their sources of income? Do they receive money from parents — each semester, each month, each week? Do they have savings from a summer job? Do they have a job on campus? Do they receive scholarship money for expenses? Are there any other sources of income?
Help your student think about 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 they are 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 they actually have — 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 about the things on which they spend money. Your student may need to continually adjust this for a while as they discover and remember new things. Obviously, if the budget won’t balance, your student will either need to increase income or reduce expenses. It may be difficult at first to see where they can reduce expenses. Your student may have a difficult time realizing, and admitting, that they may need to give up some activities. Recognizing that there is a finite amount that can be spent is sometimes difficult.
There are many budget worksheets available to help you and your student create a budget. Your student may find it most helpful, however, to create their own. Consider creating an excel spreadsheet, or just use pencil, paper, and calculator. The basic principle is simple – what goes out must match what comes in. The important thing is that it be as accurate as possible and that your student be able to keep it up as throughout the semester.
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 challenge 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.
The work of staying on the budget will be up to your student. Agree together about a few basics.
- How much follow-up will you have? Is your student on their own, or will they check in with you periodically?
- Agree on credit card use. Credit card debt is a dangerous issue for many college students. You may need to remind your student that credit card interest and charges should be included in the budget expenses.
- Help your student be realistic about whether to have a job during the school year. Some students feel that they must have a job to pay for expenses, but having a job may take valuable time away from studying. If your student is having difficulty balancing a budget, help them consider carefully whether a school-year job is necessary and manageable – and how much time spent working makes sense.
- Remember that your student may need to be flexible at first to find the realistic amount for some categories in the budget. They may need to adapt the budget, but should attempt to keep it balanced.
- Suggest that your student keep a daily spending record in some form — jotting down everything they spend. This will be one of the most important tools for helping track where their money is actually going. Those pizza runs, sporting events, campus club activities, parties, Greek life expenses, and other expenses add up more quickly than many college students — or adults — realize.
- Your student may be surprised to find that other students are also working on budgets. Spending time with those students, or sharing suggestions, may help your student stay on track and feel less peer pressure to spend.
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 income or decrease expenses, but they will know where their money is going, and will feel more in control. Working with your student to help them create a budget will open new doors of communication and understanding between you. Keeping it all as a positive experience is important for you both.
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2 thoughts on “How — and Why — to Help Your College Student Create a Budget”
I’d like to comment and underscore the importance of this topic.When I surveyed parents and students for my book, The Praeger Handbook for College Parents, a comment made frequently by many parents was that they wished they had worked with their sons and daughters to develop a budget. They also expressed the need for a better understanding of what to expect from the school in terms of tuition, fees, etc. Some of that means reading the fine print. It can also mean better communication between parents and their college students. The idea of budgeting and living within one’s means may need to be modelled more effectively at home. Some parents will put their kids on a monthly allowance that covers virtually everything, while they are in junior high or high school. That provides experience and may be helpful. One thing that I think is especially important to know is that credit card companies often target college students and then the students get in over their heads very quickly. It’s a slippery slope, but it happens frequently.
Thanks for your comment, Helen. Fortunately, the credit card problem may be getting a bit better with new federal laws requiring parents to co-sign for younger students, but credit card debt is still concerning. You are right on target that good money management requires practice, and parents can provide early opportunities for students to see and practice that skill. Students often have little or no control over the financial big picture, but they can lessen their financial stress by learning to manage their finances. I hope some readers will check out my review of your book and use your book as a source of helpful information.