The flurry of graduation is over, the thank-you notes have been sent, and now parents are anxiously awaiting the day when they drop their child off at college. A new world awaits these college freshmen. It’s a time to enjoy some new independence, explore new surroundings on campus and make new friends. It’s also a time to assume more financial responsibility.
Here are four ways parents and their college-bound kids can work together to achieve an “A” in money management.
- Develop a budget. Spend some time thinking about the monthly sources of income. You may have worked all summer and saved. When school starts, will you have an on- or off-campus job? Will your parents give a monthly allowance? If so, how much? Then, consider your monthly expenses. Laundry, cell phone, personal-care items, gas, late-night snacks and social activities should all be considered. It may be hard to estimate expenses before you actually arrive on campus, but having a basic framework will help you get started. It’s also a good time to consider wants vs. needs. You may want to stop at the campus coffee shop every day for a latte, but that $4 habit can really add up. Getting gas for a trip home, however, may be considered a necessity. There are several online budgeting tools and apps that can help you get started, such as Mint, EveryDollar and PocketGuard.
- Beware of building up debt. The credit card offers may already be arriving in the mail, and once on campus, you’ll likely get more. There are positives to opening a credit card, as it may give parents a sense of security, knowing their child is covered in case of emergency. College can also be a time to start building your credit score, but simply “charging it” can quickly get out of hand. In 2017, according to MarketWatch, Americans hit a record high of $1.02 trillion in credit-card debt. Before you go on a spending spree for new clothes or concert tickets, know the money will have to be paid back in a timely fashion or you risk damaging that credit score you’ve been trying to build. You also may have taken out student loans to pay for your tuition. These loans will need to be paid back upon graduation, adding to your debt load. Parents and students should discuss proper use of the credit card and how it will be repaid. Another good suggestion is to carry only cash. Swiping a credit or debit card doesn’t convey the same sense of loss as handing over several bills. Paying with cash can be a good trick to stay within your budget and not overspend.
- Bypass the bookstore when you can. Textbooks may be one of the biggest expenses you’ll face when you arrive on campus. The National Associate of College Stores says the average college student will spend $655 on textbooks each year, but that total can easily be much higher. You may shop sites like Amazon, chegg.com or valore.com, which typically sell used books for much less than a university bookstore. Or, invest in a Kindle or iPad and download the digital versions for substantial savings as well.
- Try to save a little money each month. It may seem pointless at this stage in your life to save, but it’s always wise to have an emergency fund. Getting in the practice now of socking away a certain percentage every month ensures it will become a lifelong habit. Try some of the automatic apps, such as Qapital, Acorns or Digit.
There’s no doubt about it—college can be expensive. Taking these steps will help you graduate on firm financial footing, ready for the next chapter.