Congratulations! Your child has graduated from high school. Pat yourself on the back for making it through the formative years of parenting in one piece. You’ve helped your child get a solid educational foundation. Once the perfect graduation party is over, it’s time to roll up your sleeves and help them prepare for college.
Many young people have a difficult time learning the concept of budgeting, especially while in college. It’s a skill that will serve your kid for the rest of their life if learned correctly. This article will give you some simple techniques to help your college-bound kid adapt to budgeting their money.
A big mistake many people of all ages make is avoiding talking about money. When communication lines are not open, your kid may try to figure everything out themselves. Worse, they may think they know everything and don’t need any guidance.
Sit down with your kid and work everything out together. Will you be helping your child with college tuition, supplies, or dorm expenses? If your financial situation prevents that, your kid needs to know they’ll have to find alternate ways to fund college.
The earlier your kid starts looking for scholarships, the better. If your kid is entering their senior year, they can start applying for high school scholarships over the summer. Remember that scholarships come in all shapes and sizes.
Some awards are called easy scholarships because the application process is straightforward and, well, easy. Other scholarships are more involved. Essay scholarships are perfect for students who enjoy writing. If that fits your teen, nudge them in that direction. They will be playing to their strengths.
Scholarships that do not require an essay are cleverly known as no essay scholarships but still require a certain threshold of academic excellence. Even if your teen doesn’t like to write, they will still need to get good grades to qualify for most scholarships.
When your teen wins a scholarship, take a close look at the fine print. Some scholarships also provide funding for supplies, books, or even housing. Funding the tuition is a priority but knowing some scholarship money may be available to ease the financial burden certainly makes things easier.
When budgeting, remember to account for fixed expenses and variable expenses. Fixed expenses don’t change and remain the same each month. Things like rent or a car payment are consistent and easier to plan for.
Other expenses, like food, clothing, or utilities, can fluctuate each month. It could be the difference between eating Ramen noodles in the dorm for a week straight or going out to hang out with their friends and getting pizza each night.
To calculate (or make a best guess) for variable expenses, an accepted rule is to allocate 30% of your budget toward variable expenses. Fixed expenses can be budgeted at 50% of your teen’s income. The other 20%? That’s set aside for goals, like saving for a house, retirement, etc.
Once your teen is college-bound, you’ll have a better idea of what their expenses will be. Add up their expected income. Do they have a part-time job? Do they have more than one job? Do they have a side hustle of some kind?
Calculate their college expenses. Add in everything, like dorm expenses, tuition, meal plans, supplies, books, lab fees, everything. The more precise you can be, the better. Think of every possible expense they can imagine, then think of the ones they can’t imagine.
When you calculate the income, underestimate it. If your teen is working, they may lose hours. You never know what will happen at a part-time job. Maybe they will need to cut back on hours to better balance life with their studies.
Overestimate expenses for college life. There will likely be unexpected needs. Maybe they won’t be told until the last minute about a lab fee. Or an opportunity for an extra credit project that requires some out-of-pocket expenses. Maybe that software they need for a graphic design class just increased in price.
Your teen may push back against some budgeting, especially when it comes to “wants.” Your teen may associate having the latest mobile phone or gaming system as a “need,” even though they can get along perfectly fine without the latest greatest widget.
Go through each expense and determine where the “wants” are. Those go to the bottom of the list for disposable income treats, if there is any after the bills are paid. If there isn’t room in the budget for some of these wants, it’s time for your teen to make changes to their lifestyle. It’s an important lesson for them to learn to be thankful, and they will appreciate things later in life as a result.
The ritual for many families is to get the child a new wardrobe of clothes to start the new school year. Your teen may want to do the same thing as they enter the freshman year of college.
One simple trick to stretch the budget is to spread expenses out (like that new wardrobe) over several months. Instead of buying all the new clothes for the first semester, they can just get a few new clothes if that’s within the budget. The same holds for class supplies. When will they need certain supplies? If these items won’t be needed until two months into the semester those purchases can wait until their budget has had a chance to catch its breath.
There are endless possibilities when finding creative ways to save money. Your kid should get in the habit of always carrying their student ID with them. Brick and mortar businesses everywhere offer student discounts, but they need to see the ID to verify the discounts.
Your teen can also get a shopping extension for their internet browser. Shopping extensions automatically seek out discount codes for items in your shopping cart when shopping online. The discounts are automatically calculated, saving money at checkout. Once installed, you don’t need to do anything else. It’s a simple, easy way to make the most of your budget.
Staying under budget in college is easy if you plan for it. Have a frank discussion about money and be honest about what your kid can (and cannot) keep in their lifestyle. The college experience is a whirlwind of challenges and new experiences. Help your teen create a sensible budget so they can enjoy those experiences with minimal stress.
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