Having a college student of my own, I can relate to this important article about money by Kathy Sweedler with Illinois Extension.
Student loans, rental agreements, car purchases, employment contracts plus day-to-day spending – all in the life of a college student! Between the ages of 18 to 25 years old, people go from spending money on fun to significant financial decisions that can affect them for many years. Launching young adults includes helping them develop healthy financial behaviors.
What are the expenses? A good place to start is to help your student (or young adult living on their own) develop a spending plan. To begin, sit down with your student and make a list of all anticipated expenses. Include expenses that you plan to pay for as well as expenses your student will be responsible for. Do your best to estimate costs. Colleges usually have a list of expected expenses on their websites.
Who pays? Once you have a list of expenses, talk about who will pay what. This is a good time for students to understand all of the expenses related to independent living including car and health insurance, car maintenance, clothing, food, and more. While you may still be paying some of these expenses, students need to be aware that these are expenses they will be paying in the not-too-distant future.
Where will the money to pay for expenses come from?
- Will your student receive financial aid?
- Does part of their financial aid package include work-study?
- Do you expect your student to work part-time during college?
- How much, if any, will you contribute?
Setting expectations for your spending
Now is the time to be clear about your expectations as well as to listen to your student’s ideas.
Make a monthly plan. The next step is to build a monthly spending plan (budget). People have an easier time managing their spending when it is clear how much money is available to spend and what expenses are anticipated during a short period such as one month. A monthly plan lets you and your student check if your plan is working before too many problems occur. Try the free budget or income tracking worksheets from Illinois Extension to help you start planning.
Track money and evaluate. To know if the spending plan is working, your student will need to keep track of where their money is going, and if their expected income comes in. This is a great habit to develop and especially useful during times of transition! Encourage students to jot down their spending once a day or as they spend money – cell phone apps work well for this!
It may be that after a month or two at college, the spending plan will need to be adjusted. Perhaps an expense category was missed, or some costs are more than anticipated. Income may not be as high as expected. Help your student evaluate choices of whether to decrease expenses or increase income.
Steps to effectively manage money
In summary, to help manage money effectively at college, take time to:
1. List all anticipated costs.
2. Determine all sources of anticipated income.
3. Decide together who will be responsible for paying which costs.
4. Develop a monthly spending plan.
5. Evaluate how the spending plan works and make revisions as needed.
Learning about finances is a lifelong process. While we can’t expect college students to be experienced money managers and not make mistakes, we can help them start out right with a little planning. Now is a good time to start the money conversation.
Cheri Burcham is responsible for family life programming in the counties of Coles, Cumberland, Douglas, Moultrie, Shelby and other parts of east central Illinois as needed. Cheri’s emphasis is on healthy lifestyles throughout the life span which include family relationships, communication, caregiving, stress management and human development including early childhood and healthy aging. Her passion is to help people to be their best selves and to promote a healthier, independent older population.