A Change in Family Finances: Creating a Budget for College Life
As a parent with a university-bound child, one of the most beneficial moves you can make is to work with your child to create a college budget plan for the upcoming school year. College may be the first time your child will be responsible for managing their own expenses, so now is the time to have a conversation with them about financial responsibility and create a concrete budget that estimates potential expenses for the year.
First, your child’s biggest expense is likely their tuition costs and associated fees. If they are living on-campus, housing costs should be figured into that annual budget as well. To hit the ground running, list these fixed costs first. If your child is living in a dorm, you should include their meal plan expense and additional outside food budget (snacks, groceries, ramen, etc.). You should also include the estimated cost for books and supplies for each semester.
If your child is living off-campus, expenses may include rent, groceries, and utilities. You will also need to create categories for clothing, entertainment (movies, weekend plans, etc.), public transportation, car payments, and other relevant expenses. Keep in mind, when budgeting for these categories, you’ll need to multiply these amounts by the number of months your child will be away at college to determine their total monetary needs for the school year. We recommend you avoid signing up for monthly contractual obligations that require you to buy out the contract to cancel them such as cable packages, gym memberships or a cell phone plan. There are cost efficient and flexible alternatives that will save you money.
Outlining each month's fixed and variable expenses will help your child stick to a monthly budget. If you or your child have already saved up money or taken out a student loan in a lump sum, be careful to parcel it out correctly, dividing the money into monthly stipends according to the budget you have created. Avoid spending more than the monthly allotted amount for any reason except emergencies.
As the parent of a future college student, the stress of preparing yourself for an empty nest and paying tuition bills is understandable. One huge and often uncomfortable subject between parents and their collegiate children is financial responsibility. You are equipped with the know-how and hands on experience to help your child understand how to manage money responsibly.
If you’re set on splitting college expenses with your child, make sure to lay out what you’ll cover and what your child will pay for when they're at college. Get them involved in the payment process. Help them navigate the banking system. Guide them through the complexities and nuances of credit and debit, and the dangers of digging themselves into a hole of debt. Remind them that credit cards, especially student credit cards, have high interest rates and debit cards are free.Teach them the power of consistent saving through methods like direct deposit.
Also, it’s important to refrain from bailing them out of every financial hardship. Mistakes are sometimes difficult to swallow, but your child may need to learn the hard way.
While money matters may be weighing heavily on your mind, teaching your child financial responsibility and budgeting appropriately for this next phase of their life is an important part of the process, and one you shouldn’t skip for their own financial well-being.
If you have questions about allocating and saving for your child’s college tuition and expenses, the financial professionals at Confidere are here to guide you through this process and answer any questions you may have.