Thursday, 7 May 2015
By the time a child heads off to college, most parents have had many discussions about how to manage the cost of tuition.
But it's also important for parents to think through how to track their children's spending — while still giving their kids room to develop financial maturity. If you develop a plan, setting boundaries and expectations, you can help your child make a smooth transition and develop strong financial habits that will last a lifetime.
Here are five steps to helping your college student with finances in a way that allows some supervision as well as independence for the student.
Sit down with your college student and help create a budget for him or her. Take into account living expenses, as well as school supplies and potential discretionary spending. By including the campus meal plan and college textbooks in your student's budget, he or she will better understand the cost of the education and may feel more invested in it. Sites like LearnVest, Good Budget and Mint can help in preparing a budget and helping your student stick to it.
Develop a specific strategy for how much money you will provide and how often. Will you be providing a big check for the semester, or will it be once a month? How much will you give? It won't be fun for either of you if your student overdraws from the account or constantly calls to ask for money. Make it a goal to set a specific amount to be deposited into your child's account on a weekly, bi-weekly or monthly basis. You can budget for it it, and your child can learn to live within that budget. Setting a monthly or once every two week payment will allow the student to get used to how they'll likely get paid after college.
It's important to keep an eye on your child's finances. A checking account with online access will allow you to check your child's balance and see what purchases have been made, as well as deposit funds remotely. Using plastic can also be easily tracked and overseen; you can set spending or low balance alerts on the account. With a prepaid debit card, your student can spend only the amount that's loaded onto the card. "Parents can keep track of expenses by making their children authorized cardholders on their credit card accounts, or create a sub-account on a prepaid debt card," says Jason Steele, credit card expert at CompareCards.com.
Remember, this is a learning process, so your child may make a few mistakes. But money mistakes have consequences, so it's okay for students to spend a few nights in if they've run out of money before their next "payday." There are plenty of technology tools to help your student stay on track, and to help you stay informed about their progress. In addition to sharing access to your student's checking account through Internet banking, mobile apps such as Mint and Left to Spend can help students stay on budget.
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