There’s an overwhelming amount information available to parents and students about the cost of college tuition, financial aid packages, and finding scholarships to help make college more affordable. There’s no getting around the fact that college is expensive and that parents and students need to talk about the cost of college and how they plan to make that work.
But beyond the big picture, once your student is in college, the responsibility of managing the day-to-day expenses in college should shift to your student. This might be a gradual process; it doesn’t need to happen all at once, but college is an excellent time to practice financial skills to prepare for the “real world” after graduation.
Talk to your student
One interesting finding in surveys of student finances may be surprising to many parents: students want to learn more about managing their money – and they want to learn it from their parents.
Many students have had responsibility for their own spending money in high school, but for most students that has not included the living costs that they need to manage in college. Many students have never created a budget or had a credit card or checking account. Managing all expenses and finances is very different from most students’ high school spending.
So helping your student manage expenses in college begins with a conversation. Start by asking your student what she knows about money management. Ask her what she’d like to learn. Even if you’re going to be giving your student her spending money in college, encourage her manage the money she receives. Help her practice financial responsibility.
What should we talk about?
You can start just about anywhere. Your student may understand some of the basic principles of wants vs. needs and money in vs. money out, but she may not know how to put that knowledge into practice. Whether your student’s budget is going to be meager or generous, helping her to be in control is the goal.
Here are a few of the topics to approach:
- Track spending – write down everything you spend for two weeks, everything. Get an idea of how much you really spend and what you spend it on.
- Make a list of all income. Job? Work Study? Money from savings? Money from mom and dad? Anything else?
- Make a list of mandatory expenses. These include fixed expenses like rent, cable, cell phone (if they apply). Then make a list of discretionary spending – snacks, events/activities, travel.
- Start to develop a budget. It may take some time for a new college student to make a realistic budget, but get started and modify later. (This is where tracking spending helps.)
- Talk to your student about balance. Money in vs. money out. It’s a simple concept, but not always easy to grasp and to put into practice.
- Talk about the importance of putting a little aside into savings for emergencies. (You may need to help your student define “emergency.”) Even if it’s only a few dollars each month, developing the savings habit now will be important for your student later.
- Help your student define any savings goals. Does she hope to save for an apartment, a car, a trip, paying back student loans? Does she have a timeline?
- Talk to your student about whether a debit card or checking account make sense. Make sure your student knows how to balance a checking account – and why it’s important.
- Have the credit card talk. If your student will have a card, make sure you discuss interest and remind your student that she will be responsible for paying – on time.
- Make sure your student knows how to check her credit report and knows what kinds of things can negatively affect it. A good source for checking this might be Experian or some other online source.
- Help your student brainstorm some ways to cut expenses if necessary. Buy textbooks online and/or used? Shop at consignment stores? (This can be fun, too!) Make some snacks rather than ordering out? Look for student discounts and coupons?
- Talk about spending limits and financial support. Will your student be earning all of her own money? Will you be supplementing? If she overspends, will you give her more? Will she need to justify the extra amount? Does the bank of mom and dad have limits? (Remember that one of the goals is for your student to become responsible for her money and keep track of it.)
- Help your student work out a system for keeping her financial information organized. What should she keep? Receipts? Bills? Tax information? How will she keep it organized? Why is it important?
How can I encourage my student to be more financially independent?
With your guidance, your student can begin to take charge of her financial life. Being in charge of her expenses will be one more step toward helping her feel in control of her life. As with so many new skills, however, your student may struggle or even stumble at times, but she can gradually feel more confident.
- Encourage your student to seek guidance if she needs it. Let her know that you are there for advice; but otherwise, let her handle things on her own – even if things seem rough or she makes some mistakes. We often learn most from our mistakes.
- If you sense that your student is struggling with expenses, try not to come to her rescue too quickly. However, there may be other ways to help. Consider a care package with some essentials (snacks, laundry detergent, a roll of quarters for laundry) to help her make ends meet. Consider a gift card for coffee or a local restaurant for a holiday or birthday. Small gifts can help without feeling as though you are taking over your student’s expenses.
- Suggest that your student look for online sites or apps that can help her with the budgeting process. Sites such as mint.com or You Need a Budget are popular with many students and young adults.
- Suggest that your student investigate whether her school offers a personal finance or financial literacy course.
- As your student becomes more confident in her abilities, expand your conversations to include student loan repayment plans, and perhaps stocks, retirement and/or other investments. Help your student look toward the future.
You may be surprised to find that your student is not only open to financial conversations, but anxious to learn what you can teach her. Helping your student manage her expenses and gain financial literacy is important for her future – and for your peace of mind.