How Parents Can Prepare Students to Manage College Expenses
From textbooks to housing, the rising price of college leaves students and their parents concerned for their financial futures. College students are in a particularly challenging financial situation. They are incurring high expenses while being limited in ways to handle the costs.
The pressing goal to graduate can cloud the realities of hefty bills that accompany a degree, such as student loans, housing, school supplies, and even day-to-day necessities.
Approximately 42.9 million Americans have student loans and struggle to pay them off well into their careers. However, because students aren’t required to pay back their student loans until 6 months after graduation, it’s not a pressing financial concern while in school. That is until it’s time for repayment, and the amount becomes a financial burden.
Regardless of living on or off-campus, room and board can significantly strain a student’s budget, especially with rising rent. According to Debt.org, the average cost of on-campus room and board is between $8,800 - $10,000 annually, depending on whether the student attends a public or private university. While off-campus options and roommates can be more affordable, housing remains a high cost for students as they pursue their studies.
College Supplies and Necessities
The cost of supplies such as textbooks, computers, clothes, and food can be easily underestimated by students since they aren’t fixed expenses like loans or rent payments. From snacks to toiletries, everyday necessities add up quickly for students, especially when most are used to having their parents provide these at home. Costs are out of sight and out of mind.
Parents Play a Big Role in Preparing Students to Manage College Finances
One of the biggest challenges parents face is being financially transparent with their teens, and it becomes a missed opportunity to teach teens fiscally responsibility. Let’s go back to one of the earlier statements about teens not understanding the costs of basic food or toiletries because most have relied on their parents to provide them. This is case and point.
Here are a few tips on how parents can open the door to financial discussions now and help their teens stay mindful of their expenses as they journey through college.
- Review the family budget together. A financial education class may give your teen some insight into expenses and budgeting, but there is no better lesson than going through your own family budget together. It will provide your teen with hands-on experience and the opportunity to connect their spending behaviors with expenses.
- Start a student checking account. Now is a perfect time to set up a student checking account for college expenses. A dedicated joint account allows teens and parents to keep track of all income and expenses together, and makes it easy for parents to transfer money to and from one place designated solely for things like books, food, etc.
- Make an all-inclusive college budget. It’s important to start by making an all-inclusive budget that is simple, easy to follow, and flexible since expenses frequently change in college. The budget should encompass the student’s entire financial situation and every expense across a comprehensive set of categories. Creating this birds-eye view of their finances allows them to see how their income or allowance directly correlates to how much they’re spending each month.
- Use Budgeting Apps for Accountability. There are many budgeting apps designed to help people manage their day-to-day spending on a micro-level. Teens can take their all-inclusive budget and program it into certain apps, such as Goodbudget, that will alert them if they exceed their monthly take-out food or entertainment budget. This helps keep their impulse spending under control.
Acorns is another popular app that allows a user to set up an automatic investment amount taken out each week, or have purchases rounded off, with the extra money then deposited into an investment account. It's a simple and easy way for teens to see the power of investing and shows them the value of saving their money.
Above all, keep lines of communication open with your teen and encourage them to lean on your or their financial institution for advice as they learn to balance their college expenses and finances.