How to Help Your Child Make a College Budget

How to Help Your Child Make a College Budget

Young future college student holding up a piggy bank.

Every teenager looks forward to the day they're accepted into the college of their choice. It's not just because of their stated goal - studying a subject they love in-depth or playing their sport in the big leagues. It's also because college is the first time most teens are treated as full adults. They'll get to live apart from their family for the first time, making their own decisions on a day to day basis. At eighteen, even going to the movies without speaking to your parents first is exciting. And with this new time in life comes the need for the creation of a college budget.

Most rising freshmen are as stressed as they are excited. They know that school and extracurriculars are going to pose challenges. They're worried about moving to a new town, making new friends and finding new hangouts. But there are aspects of living alone that surprise most people who aren't used to it. When your child is focusing on homework, sports, and friendship, they often aren't keeping an eye on their account balance, and sometimes the first time their card is declined comes as a total shock.

Here are a handful of things to keep in mind when you talk to your rising freshman about money. Following these tips will help your child get started on their college budget.

Yes, You Need a College Budget

If you're not the kind of parent who talks about money on the regular, this might be a good place to start. You might not think you need to explain why it's a good idea to know where all your money is going but think about how rarely people talk frankly about budgeting in front of teens. They might be left to absorb lessons from movies and TV, where the average college student lives in a roomy off-campus apartment and has wacky adventures and wild parties as often as the plot requires.

In order to help your child with a college budget, you need to help them organize their source of income. Help your child set up a spreadsheet with their income (from their job or from you) and all their known expenses. Conversely, you can use a budgeting app like You Need a Budget, PocketGuard, or EveryDollar. The advantage of apps is that you can enter your expenses in real-time, instead of keeping track of your receipts until the end of the day or week. Here's a comparison of some of the more popular ones.

Use the 50-30-20 Rule

When you're helping your child break down where their income will go, a good rule is that 50 percent should go to necessities, 30 percent to wants, and 20 percent to savings. If your child is responsible for part of their tuition, then that's a necessity - ditto dorm fees or rent, meal plan, other food, parking fees, and books. If all that adds up to more than 50 percent of your child's income, try not to squeeze the other two sectors too much. Allocating less for wants creates an austere budget that's hard to follow in the long term, and setting less money aside in savings is going to cause problems after graduation, or even before if you encounter unexpected costs. Your child can cut costs by paying for a less expensive meal plan and making friends with microwave ramen, or by renting textbooks rather than buying them.

Use the 50-30-20 Rule

When you're helping your child break down where their income will go, a good rule is that 50 percent should go to necessities, 30 percent to wants, and 20 percent to savings. If your child is responsible for part of their tuition, then that's a necessity - ditto dorm fees or rent, meal plan, other food, parking fees, and books. If all that adds up to more than 50 percent of your child's income, try not to squeeze the other two sectors too much. Allocating less for wants creates an austere budget that's hard to follow in the long term, and setting less money aside in savings is going to cause problems after graduation, or even before if you encounter unexpected costs. Your child can cut costs by paying for a less expensive meal plan and making friends with microwave ramen, or by renting textbooks rather than buying them.

Teach Budgeting Tips and Tricks

Once the big expenses for the semester are paid, the main goal of a budget is to keep your child mindful of what they spend on things like entertainment, dining out, and clothing. But that only helps if they know how to cut back. Thinking back to your own college days, you're probably aware that you don't want to ask too many intrusive questions about where every discretionary dollar goes - ask no questions and you'll hear no lies - but it's a good idea to lay down some general guidelines about how to cut back if they're running over budget. Things like carrying a reusable water bottle so you're never beholden to overpriced vending machines, or a travel mug so they can make coffee in their room and take it on the go instead of paying whatever the dining hall charges, can add up if done consistently every day. Here's a sample student's college budget with some hints on saving.

For first-year college students, figuring out budgeting can mean a lot of trial and error. Make sure your child has the tools they need to create their college budget.