Tips for Parents: Budget Basics for Your College-bound Child’s Checklist
Oct 01, 2017 11:12AM ● Published by North Hills Monthly magazine
All across the country, college-bound students and their families are running through the move-in day checklist: Sheets and towels? Check. In-room refrigerator? Check. Shower caddy? Check.
First-year-away-from-home-budget – Probably not even on the list.
It’s no secret that higher education is an increasingly expensive investment that can affect students’ and their families’ personal finances, starting with saving for college to paying off student loans.
Most families actively involved with helping their college student pay for college have already come to terms with the big-ticket items tuition and fees. (According to the College Board’s most recent survey of college costs, tuition and fees at a two-year public school average $11,520. That tab soars to $45,370 for private four-year college.)
But late-stage sticker shock can still set in as every day miscellaneous expenses start adding up, with the average student spending about $5,000 on additional expenses:
- Laptop or tablet, with accompanying software updates.
- Everyday essentials such as laundry and cell phone service.
- Entertainment, whether it’s coffee-shop caffeine and snacks to fuel an all-nighter (and dorm meals missed while recovering from same) to on-campus shows to off-campus adventures
- Travel to and from home
KeyBank has the following tips for the college-bound, their parents and others who are helping them along the way:
“The first step is taking a hard look at all the expenses you and your student expect to encounter and then identifying expenses that are things he or she needs, and those things he or she might want,” said Matthew Wyner, senior vice president, retail sales leader in western Pennsylvania.
The “needs” expense column includes costs such as books and supplies, mandatory fees such as lab and dorm fees, travel expenses for trips home during the school year. The “wants” expense column can quickly fill up with small items – the occasional meal out, the occasional trip to the movies, passes to school sporting events – to more expensive ventures such as social group membership fees or accompanying a friend on a spring break vacation.
“The point here is not simply to only spend money on what you need and do without what you might want,” Wyner said. “Making friends through shared experience is a big part of the college experience. You just have to think through what it will cost to cover the things your college-bound child needs and then what he or she can afford to spend on items in the “wants” column.”
Just as important, Wyner said, doing a deep dive into wants and needs is a first step toward financial wellness. At KeyBank, financial wellness means having the confidence to dream big as the result of knowing your current financial situation, your financial goals and having access to tools and insight to attain those goals. KeyBank’s financial wellness program, powered by industry leading personal finance software, helps clients to take control of their finances.
Armed with complete and realistic financial picture, families can develop budget and spending plans to help the college-bound family member to manage their money.
“When you think about it, there’s no real difference between a real-world budget and one for college students,” Wyner said. Budgets are based on income and expenses–and the occasional incentive for boosting the former and sticking to the latter.
The key to a successful budget, especially for a college student, is to keep it simple, realistic and goal oriented. First, review expenses–what your student needs and what your student might want. Then, determine available income, which can be money from summer jobs, graduation gifts, a parent-provided regular allowance or proceeds from a part-time job on campus or in the community.
Finally, add in savings goals so students learn the value of exercising restraint on today’s spending to create future financial flexibility.
For example, that student budget could include a savings incentive–a special senior year vacation, a new (or new-to-them) vehicle or gift cards to help the new college grad settle into their first post-college apartment.
“Saving a significant amount of money can seem insurmountable,” Wyner said. “Our advice to clients is small, consistent savings efforts really do add up over time. Saving $5 a week every week for four years is more than $1,000 tucked away at graduation. Parents could help support the savings incentive by matching their students’ savings goal.”
Remember, the primary purpose of college is to help students gain an education that will prepare them for a fulfilling career full of great earning potential. By helping college-bound offspring make strong financial decisions throughout their college experience, parents can have peace of mind knowing they have given their college student a head start on financial wellness.
Time for the Money Talk
You and your college-bound student have a lot to discuss between now and move-in day. Be sure money management is one of the topics. Try the following conversation starters:
- College brings all kinds of new-found independence, and that includes making independent decisions about money. That being said, it might make sense for parents to have access to their children’s accounts.
- Talk to your child about their expectations of that first year in college, including their thoughts on extracurricular activities that might carry hefty participation fees. Talking through opportunities now can help your child set priorities for how they spend their time and money on extras.
- Emphasize the importance of reconciling the amount of money going out and the money coming in. Mobile banking is a great way for your child to stay abreast of their financial situation.
- Encourage your child to use online banking tools designed to track spending and offer alerts when spending limits exceed pre-set limits.
- Share your best practices for spending less than you have.
- Again, there is no better time than the present to develop strong savings practices, such as establishing a small emergency fund to cover an unexpected expense.
This material is presented for informational purposes only and should not be construed as individual tax or financial advice. Please consult with legal, tax and/or financial advisors. KeyBank does not provide legal advice.
© KeyCorp 2017. KeyBank member FDIC.