The word “budget” can make anyone uncomfortable. Where do you start? What do you cut out, and how much do you cut? Are you willing to sacrifice in order to save?
Well, for college students, especially those fresh out of high school, this can be a huge undertaking. They’ve most likely had mom, dad or whomever handling their finances and are being let out into the world.
It can be done, and it doesn’t have to be all that scary. Use these strategies to help your child create a college student budget.
Show Me the Money: They won't get this movie reference, but the concept is important–no money, no budget!
The first step is to figure out how much your college student has to work with. Are you, as a parent or guardian, providing all of their income? If not, where is the rest coming from?
Make sure to list out what resources they have to work with, such as money earned over the summer. List each source individually to take into account, especially if some are seasonal or the amount changes each month.
All Expenses: Next, you need to figure out where the money needs to go. Start with the top priorities–bills like housing (if they're paying it directly), school payments, health insurance, and any other big ticket items that are most important. Any associated expenses such as utilities and books should go next on the list.
For the “What Ifs”: Once the larger bills are accounted for, your student should be saving for emergencies. Talk about what would happen if you are providing some or all of your college student’s income, and you suddenly lose your job or are unable to continue supporting them due to any other unforeseeable mishap. Likewise, they could also lose a job they're working and should be prepared for that scenario as well as the car breaking down, being injured and unable to work, etc. Make sure a certain percentage of the budget is going into a savings account for emergencies.
Long-Term Savings: Is your college student saving up for anything, like moving out to their own apartment, a car, or graduate school? Just as in a household, these long-term savings goals need to be accounted for before variable and entertainment spending. It helps to model how to document where the money is going, for keeping records and also to show how to balance a budget.
For the Little Things: Now that those lines have been created on the budget, it's time for the fun stuff. Have a spot on the budget for eating out, an occasional movie or concert, and other entertainment options. It is possible for a college student to live on a reasonable budget, and it's worth sharing how by setting up a positive financial plan now, they're setting themselves up for life. It’s not a time to party hard, but they should still be able to enjoy the ride.
Balancing a Ledger: Now, a good old fashioned paper-based ledger works wonders, but you may also want to consider some of the tech-friendly choices out there for younger generations. There are programs available that your college student may prefer over paper and having use of those types of software could provide useful on future resumes, or they may prefer using an app. Make sure to sit down with them and go over how to record income and expenses so that they can learn to take some responsibility as well.
Most college-age kids want to be treated like adults, so help them by teaching them how to use a monthly budget and be responsible with their money. But do remember that they are still young adults, fresh in the world. Allow them the space to enjoy life and make memories for themselves while arming them with the tools to start life out right.
What tips do you have on how to create a college student budget?