Now is a Great Time to Reevaluate Spending

October is a good time for you to help your student reevaluate his or her budget. By this time in the semester, most students have a somewhat set spending pattern, so this is a good time to look at the following expenditures to make sure they fit into your student's original budget.

Meal Plans - Is your child using more of the meal plan that you expected? If it looks like he may run out before the end of the semester, it may be time to add some funds to the meal plan or discuss ways for him to economize what funds he has left. Students can save money by scrutinizing how they spend their meal plan and cutting out extras such as snacks, high cost soft drinks or coffees, or maybe he can switch to eating a quick breakfast in his room or apartment three days per week instead of buying breakfast on the way to class.

Fun Money - Everyone needs a little extra money for going out to movies, or for meals, but if it looks like your student will run out of fun money by November 1st, that's NOT fun. Students should explore the numerous free or low cost activities on campus by reading the campus paper or watching campus advertising and social media. Programs sponsored by residence halls and the activities boards are always popular as well. Students can still go out with their friends, but attending free events or going out for an ice cream or a coffee instead of an entire meal can save a lot of fun money over time - more fun for less money!

Money Leaks - This is a great time to look for money leaks and fix them before the end of the semester. Depending on your student, money leaks can take the form of just about anything. Maybe he's downloading too many $1.99 apps or games (those add up!), maybe she's buying too many t-shirts, or maybe he's spending too much on gasoline by driving instead of walking, riding a bike, or taking the bus. This is where parents can help their child understand budgeting and work on a plan to control spending.

Discussing Family Finances With Your College Student

When I was a child people didn’t really talk about finances or how much they earned. I never asked my parents what they earned because I knew that the subject was taboo and there was no point in asking a question to which there would be no answer. My only reliable gauge of whether or not they were having financial trouble was how often they argued about money, and how nasty the arguments got. In short, I knew nothing about my family’s finances except that the lack of money caused arguments and family-wide tension. If you are of my generation and are now sending your child to college you may have had a similar experiences growing up, and if your own child doesn’t know much about family finances you need to have a frank discussion with him before he starts college.

This discussion is important for two reasons. First it expresses to your child how much you have to work to provide for the family and second it helps him understand his piece of the family’s financial pie. When I talk to college parents each summer, I cover this topic briefly and when I do, the audience grows tense.  While I understand the desire to take care of the tuition and fees for your child so he can focus on academics instead of money, it doesn’t mean that your child should remain in the dark about where the money comes from and how it's used.  

1. Discuss the college financing puzzle with your child. It’s rare for families to be able to pay cash for tuition, fees, room, board, books, and spending money. Even students from families that have saved diligently still seek out scholarships, part time jobs, or maybe even loans. Families often find that while tuition and fees can be paid from a 529 plan, room and board needs to be paid off monthly through a payment plan, and grandparents end up sending some cash to cover books or spending money. Most families collect funds from a variety of sources and have to assemble the college financing puzzle a little differently each year. Make sure your student understands this puzzle and actively helps you build it.

2. Talk about how he can help. Part time or summer employment, scholarships, student loans, graduating in 4 years, living frugally while in college; all of these are ways that parents hope their children will help them afford college, but we don’t always clearly express these expectations to our children. I have numerous conversations with parents halfway through each year in which they explain that they assumed their child would find a part time job to help pay for spending money and books. Unfortunately, the child was unaware of this assumption and never bothered to find a job. Instead, he’s used an entire year’s worth of spending money in four months. If you expect your child to live within a set budget or bring home $80.00 per week to reimburse you for his meal plan, tell him. Be clear and give him exact numbers so he knows that not only will he need to find a job, he’ll need to find one where he can earn at least $80.00 per week after taxes.

3. Plan for family financial emergencies. Having worked with college parents for nine years I’ve seen a lot of families go through a lot of financial problems. While there are some sad but rare occasions when a parent uses funds from a PLUS loan for a personal shopping spree or a vacation, most of the time financial emergencies happen because of job loss, illness and medical bills, or divorce. Your child deserves to know what your plan is in case these situations arise and it’s beneficial for everyone to work out a strategy to try to keep your child in college. This may mean that your child switches to part time status, transfers to a college near home, or has to take out a loan. Keep in mind that the goal of earning a college degree doesn’t have to change, but the strategies used to achieve that goal may.