Make Budget Basics Part of College Checklist
All across the country, college-bound students and their families are running through the move-in day checklist:
- Sheets and towels? Check.
- In-room refrigerator? Check.
- Shower caddy? Check.
- First-year-away-from-home-budget - Probably not even on the list.
It's no secret higher education is an increasingly expensive investment that can affect students' and their families' personal finance, starting with saving for college through to paying off student loans.
Most families actively involved with helping to pay for college have already come to terms with the big-ticket items tuition and fees. (According to the College Board's most recent survey of college costs, tuition and fees at a two-year public school average $11,520. That tab soars to $45,370 for private four-year college.)
But late-stage sticker shock can still set in as every day miscellaneous expenses start adding up, with the average student spending about $5,000 on additional expenses:
- Laptop or tablet, with accompanying software updates.
- Everyday essentials such as laundry and cell phone service.
- Entertainment, whether it’s coffee-shop caffeine and snacks to fuel an all-nighter (and dorm meals missed while recovering from same) to on-campus shows to off-campus adventures
- Travel to and from home
KeyBank has the following tips for the college-bound, their parents and others who are helping them along the way:
The first step is taking a hard look at all anticipated expenses. Then, break those costs out between needs and wants.
The "needs" expense column includes costs such as books and supplies, mandatory fees such as lab and dorm fees, travel expenses for trips home during the school year.
The "wants" expense column can quickly fill up with small items - the occasional meal out, the occasional trip to the movies, passes to school sporting events - to more expensive ventures such as social group membership fees or accompanying a friend on a spring break vacation.
The goal for the college-bound and their families is not limiting spending on "needs" and do without things someone might want. Building relationships is a big part of the college experience, and building relationships starts with shared experiences such as social events, impromptu off-campus adventures and the like.
The bottom line is this: Think through what it will cost to cover the things your college-bound child will need. Drill down into the details so there are no fiscal surprises. Then have a frank conversation with your college-bound child about what he or she can spend on items in the "wants" column.
Just as important, doing a deep dive into wants and needs is a first step toward financial wellness. At KeyBank, financial wellness means having the confidence to dream big as the result of knowing your current financial situation, your financial goals and having access to tools and insight to attain those goals. KeyBank's financial wellness program, powered by industry leading personal finance software, helps clients to take control of their finances.
Armed with complete and realistic financial picture, families can develop budget and spending plans to help the college-bound family member to manage their money.
When you think about it, there’s no real difference between a real-world budget and one for college students. Budgets are based on income and expenses – and the occasional incentive for boosting the former and sticking to the latter.
The key to a successful budget, especially for a college student, is to keep it simple, realistic and goal oriented. First, review expenses - what your student needs and what your student might want. Then, determine available income, which can be money from summer jobs, graduation gifts, a parent-provided regular allowance or proceeds from a part-time job on campus or in the community.
Finally, add in savings goals so students learn the value of exercising restraint on today's spending to create future financial flexibility.
For example, that student budget could include a savings incentive - a special senior year vacation, a new (or new-to-them) vehicle or gift cards to help the new college grad settle into their first post-college apartment.
Yes, saving a significant amount of money can seem insurmountable. At KeyBank, our experience is small, consistent savings efforts really do add up over time. Saving $5 a week every week for four years is more than $1,000 tucked away at graduation. Parents could help support the savings incentive by matching their students' savings goal.
Remember, the primary purpose of college is to help students gain an education that will prepare them for a fulfilling career full of great earning potential. By helping college-bound offspring make strong financial decisions throughout their college experience, parents can have peace of mind knowing they have given their college student a head start on financial wellness.
This material is presented for informational purposes only and should not be construed as individual tax or financial advice. Please consult with legal, tax and/or financial advisors. KeyBank does not provide legal advice.
Aaron Reitz is central Indiana market president at KeyBank.