In just a few short months, your kids may be heading off to college – many for the first time. I know the to-do list is a mile long at this point, on it everything from purchasing a shower caddy to sorting out those student loans.
But at some point before you drop your freshman off, I encourage you to sit down, together, and make a budget. Whether she’s getting a job, you’re providing her with spending cash, or a combination of the two, you want to make sure that the well hasn’t run dry come October. Here’s a crash course in how to do it, as well as some sample budgets and a worksheet to get you started.
Leave things a bit fluid. Before we go through the steps of coming up with that budget, I want to be clear about one thing – for all to go smoothly, you both need to be flexible here. Neither of you know what to expect, so setting a strict limit in each category – groceries, entertainment, laundry – just won’t work. Instead, you need to set a reasonable limit on the total amount she can spend, based on how much she’s bringing in – from you, a part-time job, scholarships or grants. Add all of those up, throw in any savings she’s accumulated over the summer, and you’ll have a nice framework for your budget.
Estimate fixed expenses. Some of these are easy – if she’s going to have the same car, you know how much her car insurance or payments will cost. If she’s living off campus, you can add rent and utilities in here. A cell phone payment and any other monthly bills will be tacked on as well. Other school-related costs, like books, campus room and board, and tuition, should come out of the money you’ve saved for college, loans, or scholarships. Here’s a sample budget for an entire semester, to guide you:
Tally up flexible expenses. These are things like the aforementioned laundry, entertainment and groceries, but also clothing, toiletries, food outside of her meal plan, gas and other transportation costs. Basically anything that will vary from month to month. The best way to get a handle on these is by calling your school’s financial aid office – often they will have a sample budget or list of common expenses for incoming students that can help you make these estimations.
Break it down into months. I find budgets much easier to manage in small pieces, because you’re allowed to start over before you get too out of control. If she has a chunk of money for an entire semester, it’s easy to blow it all in the first month – especially as a first-year college student, away from home for the first time. But if instead, she gets a set amount each month, if the first month goes awry, she’s able to start over the next month and learn from her mistake. You can take this even further, breaking months into weeks, as well – sample budgets for both are below:
Set up a system of organization. My advice is to keep the bulk of her money for the semester in a savings account, and set up automatic transfers at the beginning of each month (or week, if you decided to go that direction). That way, the cash in savings will earn a little interest – not much, mind you, but every little bit helps – and she’ll be giving herself a paycheck. If she gets an actual paycheck, from a part-time job, she can deposit that in savings and then pay herself from the pot.
Lastly, be careful of those ATM fees, which can really throw a wrench in any budget. Encourage her to only use in-network ATMs, or, if that’s not possible, to make one trip to the ATM each week for all of her cash (do a little research – she should keep her money at a bank that is convenient, with a couple locations and ATMs in the college’s town or city).