Summer’s Over and School’s in Session!
August 26, 2015
With classes starting at colleges and universities all across the country, many incoming freshmen are leaving home and living on their own for the first time. Packing, outfitting the dorm room, learning to navigate the campus – there’s so much to do! But parents, before completing your to-do list, make sure you take some time to talk with your college-bound kid about creating a budget. Most of today’s high schools and colleges don’t teach personal finance. So, without parental support, many kids are left to navigate their newfound financial responsibilities on their own.
With tuitions constantly on the rise, today’s students are graduating with tens, if not hundreds, of thousands of dollars in student loan debt that they may be paying off for many years. Even if you’re covering their college costs, your young adults still need to expect and budget for all the additional expenses associated with the college experience, which could include nights out and those infamous spring breaks.
Budgeting is a very personal activity, so there’s an infinite number of ways to make one. For us, one of easiest to setup and follow is the 50/30/20 budget. This budget breaks down your total monthly expenses into three categories:
50% for Fixed Expenses – things that the student has committed to paying each month, including rent, cell phone bills, or Netflix subscriptions.
30% for Flexible Spending – things that vary each month, including dining out, gas, entertainment, and all the fun stuff that can quickly consume a budget.
20% for Personal Investment – Investing in your personal financial health, like paying off debt, or building up an emergency fund to cover those unexpected expenses that would otherwise destroy a budget.
To help your student stay on track and increase their financial knowledge, there are a lot of online resources and mobile apps out there. Mint.com is one of the more popular online budgeting tools. On their website and mobile app, students can connect their bank accounts to their budget and be updated in real-time if they’re sticking to the plan. Other sites, such as ReadyforZero.com and CreditKarma.com can help students learn tips for repaying their loans and the importance of understanding and monitoring their credit score.
College is the place where many people discover themselves and make life-long attachments, both to friends and football teams. There isn’t a better time for a parent to help them establish a budget and create life-long good financial habits as well.