How to Help Your Kids Budget for College

By 110 Pounds And Counting on July 23, 2010

student budget college saving college student debt student spending college saving This fall thousands of students will be off to college. Their dreams of participating in stimulating debates, strolling through a lush campus steeped in academic tradition, and, let’s face it, partying without their parents’ supervision are about to come true.  

For many, this will be the first time that they live on their own. It is also likely to be the first time that they have ever had to be solely responsible for their spending. Sending a child away with a lump sum of cash in the bank and no guidance is a recipe for disaster. Is your son or daughter ready to meet academic payment deadlines, pay for groceries and books, and make his or her money last for the whole year? Here are a few ways to ensure that your child starts their financial independence on sound footing.

Sources of Funds

Self-control is the key to making money last. The amount of control that your child must demonstrate will, in part, depend on where the funds are coming from. If you are funding your child's schooling, then it is easy for you to help them control their spending by limiting the amount that you deposit into their account. A debit card is all they will need to access funds for tuition, rent, books, food, and fun. Alternatively, if you are concerned about depositing larger amounts such as those that are needed to cover tuition installments or rent, you can continue to pay these directly and thereby minimize the amount for which the child is responsible.  

If you have co-signed a loan or if the child has received financial assistance or a scholarship, it is likely that they will receive a lump sum that they can access freely. To help monitor the funds, it is recommended that the money be deposited into a jointly-registered bank account so you can check on the transactions periodically. Otherwise, you may find that your son or daughter’s tuition money has been spent inappropriately, which is a very costly mistake to make.

Budget

This time is an opportunity to teach your child about the value of money as well as the value of an education. The best time to discuss the funds that are available and what they are expected to cover is before your teen even sets foot on campus. Also, many colleges have special counselors that your child can meet with to help them prepare a budget.  

Naturally, your child will want to have fun during these years as well. Help them understand how to quantify how much fun money they can spend on a weekly basis. If you are unable or unwilling to replenish their account, make sure they understand that it will be their responsibility to earn any additional money that they want to spend.

Prepare to face temptations

Students face numerous temptations on campus including offers of low-interest credit cards. Speak with them before they sign on the dotted line and before they create a life-long relationship with credit. Explain that the credit card is a great way to establish a credit rating but that this responsibility is significant and comes with a price. Credit balances must be repaid, and the interest charges can range from 10 to 18 percent on a generic card. Furthermore, the debt they accumulate can last for many years after schooling is finished and can affect their ability to borrow in the future.

Over time, your child will also learn about the banking industry as well as key skills like how to apply for a loan and watching for fees charged on transactions. They should be advised to withdraw funds from their bank’s ATM machines only to avoid the costly transaction fees associated with banking at other machines. Furthermore, have them explore the type of account that suits them best based on the number of transactions that they anticipate and their aptitude to paying bills online.  

Letting Go

Be prepared for the fact that your child may make financial mistakes along the way. Take this opportunity to help your child understand the responsibilities of managing money. This is a prime time for them to learn the pride that comes with balancing a budget and starting a path towards accumulating wealth.  

Use any missteps in these early days as an opportunity to allow them to become independent financially. In other words, do not bail them out. As parents we are responsible for providing opportunities for our children to fly, while also giving them a soft place to land if they fall, but do not confuse responsibility with being a financial doormat. If you continually fix your children’s financial mistakes you risk having financial dependents for the rest of your life.

Getting your children prepared for independence is one of the greatest gifts you can give. Giving them the tools to be financially responsible will allow them to enjoy the other benefits of campus – and after-campus – life.  

Disclaimer:

The information contained in this article is for general information purposes only.The information is provided by Monique Madan and while we endeavor to keep the information up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the information, products, services, or related graphics contained on the website for any purpose. Any reliance you place on such information is therefore strictly at your own risk.


By 110 Pounds And Counting| July 23, 2010
Categories:  Restore

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110 Pounds And Counting

110 Pounds And Counting

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