Today we are pleased to present a guest article by Linda Matthew on a particularly timely topic for the parents of current college students . . .
Towards the end of his first semester in college, my fiercely independent son let drop that he was feeling worried about his finances. He couldn’t get a handle on just how much was coming in, and his money seemed to be going out much faster than it had before.
It was a good opening, to actually be asked to help a young person, and I was happy to have it. If your own child has recently gone off to college, this could be a good time to check in and see how they are doing with their finances. There can be a wide variation in what expenses the student covers versus how much mom and dad provide, but even if you are paying for every penny right down to an allowance, the student will be managing some of the money.
If the child has questions (or you do), the first thing that can be very useful is a spending summary for the semester so far. Have them take their bank statement for September and total up their spending for that month by category (food, phone, laundry, outings, printing, transportation etc.) Then have them do the same for October. It can help a lot for them to see how much they are spending on each thing.
I remember that my son was stunned to see how much he was spending on the little green scooters that the kids zoom around on. They didn’t seem like much at $2 to $3 a ride, but apparently they added up. Once they have categories done, they can find the grand total of their expenses for each month, and compare that to their income. This will help them see whether they are going over their income, and why. (If categorizing is too complicated, it can still be very useful to do the second part. Our spending rarely feels as if it’s much each day, and the grand total for the month can be a much larger number than we might have expected.) Either way, the key is to find out the numbers – putting specific numbers to things is the only way to get beyond that stage of just feeling vaguely uncomfortable.
Sometimes, the problem can be that strange things are happening, and this is a good time to try to get to the bottom of those. With our older son, his meal plan was disappearing much faster than we had anticipated. A little digging turned up the fact that he had been using it at Starbucks, which took his meal card, and we had to explain to him that we were not paying for fancy coffees. While he was welcome to buy those, he needed to do it out of his own earnings, not the meal plan that we were covering.
It is worth noting in this category also that some college meal plans can be very confusing, and it’s hard not to think that it’s intentional.
One son had “free” points that he could use at specific meals on the weekend. The meals were at times that he could never make, and finally I realized that we were actually paying for those unused “free” points, and that there was a plan we could buy without them, listed at the very bottom of the page. Things got a lot cheaper after that. Other schools have “dining hall bucks” that are supposedly discounted, but looking at the numbers shows that there is no savings. For example, you might pay $10 for 4 meal bucks, only to find that 4 meal bucks buys – yes – $10 worth of food.
The last point I will make is that I am not a fan of credit cards for college students. When there is money in a bank account and a debit card on that, it is very easy to tell when you have hit the limit of your budget – your account is at zero. Then you know that you are in trouble, and it is time to make another plan.
Using a credit card is basically spending the money before you earn it, and it is very difficult to understand exactly where you are relative to your budget. People worry about “building credit”, but why not build savings instead? “Building credit” is really just building debt, and we do our children no favours by loading them with debt so early in life.
About Linda Matthew
Today’s guest author is Linda Matthew, an Accredited Financial Counselor® and the owner of MoneyMindful Personal Financial Coaching, with which College Affordability Solutions has partnered since 2016. Linda has clients throughout the U.S. and Canada. She is also the parent of one college graduate and one current college student.
Linda’s new book, Teach Your Children About Money, describes age-appropriate methods for helping youngsters learn about themselves and different ways to manage their money. It also has a special section just for college.