Budgeting for College Students
Budgeting for college students?
Your high school graduate is heading off to college in the fall. Congratulations to both parents and students for arriving at this milestone. Enjoy a well-deserved celebration, but before the kids go and spend all of the cash they received as graduation gifts, talk with them about saving, spending habits and using a budget. This will be the first time many of them are “on their own” and responsible for their own spending decisions.
How much will they spend?
A client recently asked my how much their son should set aside for all of his daily expenses next year. At this point, you’ve hopefully already figured out how to get tuition paid with some combination of financial aid, student loans, savings accounts, etc. For today, we’re just talking about expenses during the school year. There are a bunch of factors, but the bottom line is it depends on the kid and their spending habits.
Budgeting -for college students??
If they are conscientious about their spending, and they stick to cafeteria food for most of their meals, then their biggest expense will be textbooks and supplies. If they are well stocked when they move into the dorm, they can probably get by with a few dollars for entertainment and the occasional pizza off campus. If the student is a big spender, there are things parents/students can do to try to protect the students from themselves:
So, back to the original question: I would determine an average weekly spending estimate, say $50 x 18 weeks in each semester = 1,800 in spending money for 2 semesters, plus another $1,000 for books/supplies = 2,800. -This doesn’t include spring break trips, so they may want to plan for that and put money aside so the funds are still available when March/April rolls around.
At the end of the day, it is up to the students to make solid spending decisions. Using a budget, setting spending limits, and tracking expenses will help ensure they don’t run out of money before the end of the school year. And if they start good spending habits now, they’ll be more likely to successfully manage their finances after they graduate and head out into the work world. -Just like a grownup.
John A. Davidson, CFP®
Your high school graduate is heading off to college in the fall. Congratulations to both parents and students for arriving at this milestone. Enjoy a well-deserved celebration, but before the kids go and spend all of the cash they received as graduation gifts, talk with them about saving, spending habits and using a budget. This will be the first time many of them are “on their own” and responsible for their own spending decisions.
How much will they spend?
A client recently asked my how much their son should set aside for all of his daily expenses next year. At this point, you’ve hopefully already figured out how to get tuition paid with some combination of financial aid, student loans, savings accounts, etc. For today, we’re just talking about expenses during the school year. There are a bunch of factors, but the bottom line is it depends on the kid and their spending habits.
Budgeting -for college students??
If they are conscientious about their spending, and they stick to cafeteria food for most of their meals, then their biggest expense will be textbooks and supplies. If they are well stocked when they move into the dorm, they can probably get by with a few dollars for entertainment and the occasional pizza off campus. If the student is a big spender, there are things parents/students can do to try to protect the students from themselves:
- Set a budget for monthly spending and only fund the monthly amount into the spending account. Make it a reasonable amount for snacks, weekend activities, etc, but
- Separate savings account funds from spending/checking account and transfer funds only when needed. Or set up a weekly/monthly transfer from savings to checking for a fixed amount, similar to a paycheck. If you underspend one month, you’ll have extra cash next month. Similarly, if you buy a front row concert ticket, you may need to stay in the dorm the next few weekends instead of going out with your friends.
- Monitor spending, review spending, cash balance periodically. Use Quicken, MS Money or any other app that will allow you to categorize expenses and track spending over time. You can also monitor your balance to avoid overdraft fees.
- Avoid using credit cards for everyday expenses. If necessary, keep just one, only for emergencies, --and spring break in Cancun is not an emergency.
- Avoid signing up for credit cards to get “Free stuff” -These programs are set up to trap students with debt they can’t get out of.
So, back to the original question: I would determine an average weekly spending estimate, say $50 x 18 weeks in each semester = 1,800 in spending money for 2 semesters, plus another $1,000 for books/supplies = 2,800. -This doesn’t include spring break trips, so they may want to plan for that and put money aside so the funds are still available when March/April rolls around.
At the end of the day, it is up to the students to make solid spending decisions. Using a budget, setting spending limits, and tracking expenses will help ensure they don’t run out of money before the end of the school year. And if they start good spending habits now, they’ll be more likely to successfully manage their finances after they graduate and head out into the work world. -Just like a grownup.
John A. Davidson, CFP®