Colleges and universities are supposed to tell students their full cost of attendance, including all tuition, book costs, and living expenses – and they generally do a good job of highlighting the big ticket items. But first-year arrivals still have a lot to learn about paying those daily bills and this can be a source of considerable stress. It’s hard to suddenly live on a set budget if you’ve really never done so before.
Many first-year students have problems managing their cash wisely and can end up spending much more money than they actually have and then borrowing unnecessarily – often without parents’ knowledge.
Be Sure to Establish a Budget
Rather than give them a year’s worth of capital up front, consider transferring a certain amount of money to your charges to cover expenses for a shorter period of time – and insist that they keep track of all transactions. For instance, if they’re getting a chequing account for the first time, show them how to balance their chequebook and record their transactions to avoid coming up short or bouncing cheques. While you might still prefer do this by hand, they’ll likely be more comfortable using colourful cash management sites like Mint or an app like Goodbudget.
From the outset, make sure they know how much they can safely spend each week, factoring in the costs of going out, alcohol, clothes, travel, mobile phones, internet use and music downloads. Keep in mind that costs during frosh week will likely be much higher than an average week on campus. Once they’ve settled in, though, take the time to review their spending habits using their bank statements to check the budget.
Still, don’t be overly critical when you spot an error. This is another learning opportunity and that’s why you sent them away in the first place.
But Where are You Going to Live?
Living on campus is an essential part of the university experience and first-year undergraduate students are usually guaranteed a place in residence. As a result, they don’t need to worry about arranging for their own electricity, laundry, or food for that matter since most schools insist they sign up for a meal plan.
If they do end up living off campus and sharing space, however, things get much more complicated. With billing for utilities done under one name and only one or two roommates on the lease, keeping tabs on the money flow isn’t easy. One good way to manage money is to set up a pool so everyone contributes to the essentials – toilet paper, coffee, bread and milk, etc. It’s a good way to avoid buying too many of the same item unnecessarily and ensuring that one person doesn’t end up footing too many costs.
When it comes to paying bills, consider opening a house account that everyone can pay into. If your child is going to be in charge here, ensure that receipts are set aside for reference to save on arguments when it comes to settling bills and payments. An app like Splitwise lets users easily add roommates based on phone number or e-mail, input the total amount of a bill and a description, and divide equally by a percentage or “shares.” It does the math, and also sends notifications and reminders.
Manage Credit Cards Wisely
Being away from home for the first time, students often don’t realize how small purchases can add up in the bigger picture. Because of this, too many end up strapped, particularly when it comes to credit cards which have become so easy to get that they can sign up for one between classes.
Used wisely, credit cards can be beneficial, especially in emergencies. But not having had one of their own before, many students don’t realize the added costs – i.e. 18 to 19% interest charges – if the outstanding balance isn’t paid immediately by the due date. Don’t let them be swayed by welcome offers such as a free T-shirt or chance to win a trip and instead encourage them to compare features such as interest rates and fees. Tardy payments can stain a credit rating which is very hard to remedy, even many years down the road when it comes time to purchase a car or apply for a mortgage.
Don’t Pay Twice for Health Insurance
As part of registration, students can expect to be automatically enrolled in a school-run health and dental insurance plan, similar to plans offered to working employees. This generally covers supplemental health procedures, out-of-country travel insurance, and most routine dental work. Usually enrollment is mandatory but if they’re covered by your existing plan, you can get your money back. You must opt-out by a certain date, however – generally a few weeks after school starts.
University and college can be a very stressful yet exciting step in your parent-child relationship. Start off with the right financial footing, and you’ll prepare your children for bigger money milestones down the road.