Don’t wait until your children head off for their first year of
college to teach them how to manage money.
Don’t wait until your children head off for their first year of college to teach them how to manage money.
The California Society of CPAs (www.calcpa.org) says that parents can prepare their children for the rigors of managing a college budget by discussing monetary issues openly and teaching them the basics of personal finance.
HAVE A PLAN IN PLACE
To avoid misunderstandings with your soon-to-be college freshman, be up front about which college expenses you will cover and which you’ll expect your child to pay.
Once you agree, decide on a plan for disbursing those funds.
Monthly payments typically work best. Students given a large lump sum at the beginning of the semester may be tempted to use the entire amount in the first few months.
Be clear that when the money runs out, unless it’s an emergency, you won’t cover the shortfall. Otherwise, your child will never learn to live on a budget.
FOCUS ON BUDGETING
College life is full of opportunities to spend. Encouraging your child to develop a budget will help them maintain control of their money and limit spending.
Have your child list all sources of monthly income-job earnings, savings, and parental support-and then develop a list of estimated expenses for the same time.
Realistically identifying your student’s college living expenses in advance can be tricky.
For starters, have your child consider the cost of books and school supplies, meals not covered by a meal plan, entertainment, personal care items, laundry, telephone and Internet service, cab rides or car expenses, and clothes.
Remember, budgets need to be flexible and can be revised after the first month or two. The next step is to total income and expenses.
BEWARE OF CREDIT
With credit card companies aggressively targeting college students, credit cards can be a major pitfall for your child.
Discuss the pros and cons of using a credit card. For example, having a credit card for emergencies and for building a credit history is not necessarily a bad idea. But for some students, access to credit is an invitation to overspend.
If you decide it makes sense for your child to have a credit card, be sure he or she understands how credit works and the importance of charging no more than the amount they can comfortably afford to pay each month.
Want to be on the safe side? Have your child use a debit card for everyday expenses and reserve the credit card for true emergencies.
SMART SPENDING
Remind your child that he or she can keep spending under control by looking for low-cost entertainment on campus.
Universities and college towns are infamous for having excellent entertainment at lower prices. Also, joining clubs and organizations ensures that a college student will have something to do and someone to do it with, and the expenses are far less than what could be incurred on a weekend shopping spree.
