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This post is inspired by one of my clients out of San Ramon.
One of the first things that you need to do when your child is ready to go to college is help your student create a college budget. Why? He or she will be on their own for the first time and may not realize the sheer volume of bills that they will be facing or how to handle the cash flow that they will be receiving from scholarships, loans and a job. Here’s a good primer to creating a good starting budget for your student.
Sit Down Together and Make a Plan
If you are paying for a portion of your student’s college expenses, you should seriously consider creating the budget with them. Make sure that it is crystal clear what you will be paying for and what you won’t. Also discuss how much money will be available in emergency situations and how much leeway there is in the budget from month to month. Also make it clear who will have the final say in any large scale financial decisions.
Detail Your Budget Timeframe
Make a detailed budget either by the month, by the semester or for the entire school year. Monthly budgets are the easiest to create and modify on the go while year long ones give your student the benefit of seeing long term charges and things that only happen once or twice a year like auto insurance payments.
Record Your Income
Create a set of income categories for your student so he can see exactly where his money is coming from. It may help to create a pie chart so he sees how much you are contributing to his overall lifestyle. Savings, job income, parental contributions and scholarships, grants and student loans should all be on this list.
List Your Expenses
Here’s the tough part for your student listing expenses. You’ll have to break it to him gently that there are expenses that he’s never considered. Of course there will be tuition and fees for each semester of school, then there will be the cost of books and supplies. Room and board will take a huge chunk out of the budget and if your student has a car that will be another major expense. Other expenses could include groceries, personal items, phone bill, clothing, entertainment, car insurance, health insurance, and transportation on campus. Also add an emergency fund that takes care of 10% of the budget for unseen costs that may come up.
Balance the Budget
Now balance that budget. Make sure that you can allocate the income funds with the outgoing costs. Breaking even is good, having a little left over at the end of the month is even better. You’ll be able to save it up for big ticket purchases like a nicer phone or a flat screen television and add them into your college budget.