Follow these guidelines to teach your college-bound children how to establish healthy money management at an early stage.
Before You Begin
Budgeting puts you and the student in greater control of his or her finances. Keep in mind these guidelines when sitting down with the student and developing a budget:
- Be realistic about your undergraduate's needs. Remember, he or she still needs to eat.
- Give them a bit of maneuvering room.
- Stick to the basics. This should be a snapshot of his or her financial situation-not a detailed look at every single possible expense.
- Revisit the budget regularly. A budget is only as effective as its last update, so make sure to keep it current.
- Balance the checkbook. This may seem basic, but be sure the student knows how to balance a checkbook. Make sure they track all ATM withdrawals and debit card purchases, which are often forgotten.
- Also, be sure the student knows how to write a check-don't assume he or she knows.
Getting Started
- Resources. Begin by identifying your undergraduate's resources or income. This could be salary from a part-time or campus job, a monthly stipend, savings, or gifts. Add all identified resources to determine the amount of money with which the student will have to work.
- Expenses. Now identify all reasons for expenses, such as rent and utilities, transportation, entertainment, and personal expenses.
- Discretionary income. This is the amount of money left after you've subtracted expenses from resources, or income. This money can be used for additional expenses not allotted in the budget. Or, your undergraduate can save this money. He or she will be way ahead of the curve with a nice little nest egg built up while in college. If you find the discretionary income is in the negative, you should revisit the listed expenses and see if something can be reduced or determine if you and/or the student will need to find additional income-maybe from a job or loan.
What About Your Financial Institution?
Developing a budget is a critical component in putting your undergraduate on the road to financial success. As a parent, you also can look to your financial institution for some help in that department. They're there to help you with your financial needs. For example:
- Does your bank have locations at your undergraduate's university? This could help with transferring funds and keeping tabs on the account balance and spending patterns.
- Check out online banking and online bill pay services. This can help the student stay close to his or her money without going to the bank. They can look up their account online to see current balances, what checks have cleared, transferring funds, etc. Online bill payment is also available at many financial institutions and allows your child to set up recurring payments.
- Are there banking services with fee-free ATMs near campus? Does the campus have a university debit card?
- Credit card or debit card? A debit card may prove to be a safer option, with your child able only to spend money currently available. Whatever choice you make, get a tight grip on spending. Set up rules for what the credit card should be used for. Ask if your financial institution has any materials on debt management and keeping credit in check.
Even though your undergraduate is embarking on the road toward independence, you still need to play a pivotal role in his or her financial education. This is an opportune time to teach your student about responsible money management. TPW