Want to avoid the frantic phone call of “Help! Send money, quick!” from your college student? As our children begin their first exposure into the real world, it is not only in our best interest to assist them with a budget of their own, but I believe it is our responsibility as parents. Here are some ways that you can help your young adults to manage money and live within their budgets:
Try to introduce a budget to them as an opportunity to be responsible for themselves and not a method of control by you. Explain that a budget is what they will need to be successful throughout the remainder of their lives. Making a budget work in college is your child’s first step to being financially responsible.
Share your budget with them, discussing the reasons you made adjustments to your budget, to help you reach your goals. Discuss the reasons you made your goals and why they were important to you. This helps them apply the thought process that you used to their own budget and goals.
Prior to them leaving home, create a budget together, combining your experience with their needs. It is very important to create this budget together, as their needs will be different from your own or what you would anticipate (or want) their needs to be. For the budget to be successful, make it honest and real, allowing for snacks and party essentials that you know will be a reality.
Assist them with making their own goals, both short-term and long-term. This helps them recognize the advantages of adjusting their lifestyle to meet their goals.
Discuss each category of expense with them, recognizing the ways it would be easy to miss the budget. Offer ideas on how to save money in each type of expense, should the need arise. For example, a college student wanting to participate in a school activity requiring money not in the budget could commit to not ordering pizza for two months. The savings would allow for the money needed for the school activity. Show them how they can use the budget as a management tool for their money. Ideas from your experience will give your children the tools they need to make a budget successful for them.
Discuss different types of unexpected expenses that might arise in a college student’s life. Offer suggestions on how to treat these expenses and how they fit into the budget. For example, the college student who needs repairs on his vehicle that surpass the budget could obtain a loan from his parents. Loans from parents should have specific payment terms, and those terms should be met. Make them aware that being financially responsible extends to arrangements with parents and family.
If you are supporting them during college, distribute their money at intervals, such as the beginning of each month. This should be helpful as they manage their money with their monthly budget. They should develop methods to make their money last by using their budget.
When your college students earn their supplemental income, encourage them to have a savings plan in place. Help them understand the importance of planning for the unexpected. Make sure they understand that these funds are not the “party pot!”
Be sure to discuss fully the consequences that will result when your college students are not managing their money wisely and living within their budget. This needs to be done at the time you put the budget into place so they are aware of the consequences of their decisions.
Develop a timetable together to review each month’s budget results. Discuss any areas where they were unable to meet the budget assigned. Decide together if any adjustments are needed to the budget, and discuss the valuable lessons to learn from failures. Do not forget to praise their successes.
An excellent reading source for your college student or teenager is “Learn to Earn” by Peter Lynch. This is a good book to learn about savings and written at a level that even teenagers will be able to understand and find useful.
As with all parenting, keeping communication open and honest will assist you with your college student’s success with budgets. If you have been successful in your budget training, your college student will not find the need to communicate with you via frantic collect calls! For more information regarding this topic or any other tax-related issue, please call Henssler Financial Tax & Accounting Division at 770-428-4025.
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This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
