By Jennifer Streiff, Money for Life Spending Management Coach
It seems that parents go to great lengths to ensure that their students are ready to go away to college – you help to research schools, help with applications, buy books and even make sure they have a suitable place to live. The one area that often seems to be overlooked, however, is managing their personal finances and their spending.
Statistics show that 83% of college students graduate with an average of $2,300.00 in credit card debt*. For graduate students that number more than doubles, reaching $7,800. And that doesn’t even take into account their student loans! Why are these numbers so high? Perhaps it’s because they were never taught to live on a budget or how to manage their spending.
They definitely don’t learn this stuff in Home Economics Class! It’s up to you, parents, to teach them how to effectively manage their spending. To set them up for success, set aside time together to create a spending plan and to teach them the skills they need to manage it. You just might save yourself a phone call or two asking for extra money, while you are at it!
Here are a few steps to help you get started:
- Sit down with your student and layout a list of the expenses that they are likely to incur – doing this together will help them to start taking ownership of their financial future.
- Together determine the amounts to budget for the various spending categories. When appropriate use your household expenses as examples so that your teen can get a better idea of what various things cost.
- Find a bank or credit union that has no-cost accounts that will be easily accessible for both of you. You, of course, don’t want to pay any extra fees on the accounts, nor do you want large ATM fees in case your student doesn’t have a bank branch close by. Two other things to consider – make sure the checking account comes with a debit card and that all accounts have free online banking.
- Find a spending management tool that will help your student track their day-to-day spending. An online budgeting system like Mvelopes Personal is the perfect way to do this. This program helps your student proactively set up a spending plan before they start spending. Since it tracks all of your student’s day-to-day expenses automatically, he or she will always know how much they have left to spend and how long it needs to last (www.mvelopes.com).
- Talk about credit cards, high interest rates and what really constitutes an emergency (this is critical if you are giving them a credit card for emergency use). Another option to consider is a fixed amount debit card. This allows them the convenience of a credit card, without the risk of overspending and high-interest debt.
With a little prep work beforehand, you and your college student can be ready for that first real world adventure!