Budgeting for Students
by Diane Helm

High School can be a great money management experience for both student and parents. It may be the first time that kids are making money on their own and handling their money without parental supervision.

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But, how much money will they really need? How can they economize and develop a realistic spending style that stays with them the rest of their life?

You can start by recognizing that most costs -- like many types of expenses -- fall into two basic categories: fixed and flexible.

Learn good budgeting habits by paying the fixed expenses first. Then develop the right spending habits to manage what's flexible. If expenses are well thought out, students won't have to take a loan from the Bank of Mommy & Daddy.

For most of our adult lives we manage inflow and outflow of cash, and it's tough. If you're a student, take 20 minutes to mentally walk through your day. Will you buy snacks? Will free periods involve any expenses? What is your typical weekend plan? What might that cost?

Keep these items in mind because here are a few of the non-school expenses that you as a parent and/or student should keep in mind as you prepare for school this year. By considering all of these potential expenses, you can put your student on a reasonable budget.

You can also make your child better understand costs if he or she is involved in preparing this budget and consider each of the following: entertainment, food, clothes, sports equipment, phone calls home or anywhere, postage, haircuts, Internet service providers or other online access, medical and dental fees, insurance, and miscellaneous needs. One of the most crucial categories of spending involves social spending. How does your child spend without you around? Does spending mean fitting in? Will they spend or be independent?

Parents should help students be realistic about social spending needs. You can do this by asking your child to follow this series of financial exercises to learn his or her spending habits. While these are suggested for high school students, parents would benefit from doing them in their own lives.

* Keep a journal to record your money habits for three days. Write down every penny you spend. See how much goes to books, magazines you never read, candy you never eat and cigarettes you shouldn't smoke. How much goes for meals out? How much money goes for convenience goods/services, such as gas for the car, rental movies, cleaners, or CDs?

* As a student, don't pre-judge your actions. Simply record what gave you satisfaction and what was a waste of money. Create a chart of your spending habits to make a budget expressed in percentages, not dollars. If you have $100 a week to spend and $50 is spent on food, that's one-half of your pie chart (no pun intended). By visually calculating your spending, it typically has a profound psychological effect and leads to more savings with less frustration then counting pennies.

* If, for example, your car takes up half your pie chart, you can begin to shift expenses away from other things to meet your auto expenses, or limit your car use if you conclude that it's just not worth it. The bottom line is that spending is discretionary. It's up to you to allocate and to do without if you are unrealistic.

* You can also take an active stance to curtail unneeded expenses and to avoid the usual student/parent money fights. Here are some tips to avoid financial skirmishes:

* Instead of using a credit card, establish a debit card for the student. Debit cards are limited by the amount of money held in the account of the bank that issued it. This way, students can't overextend their budgets.

* Use a phone card that covers what you expect to be reasonable costs over a given period of time, such as a month.

* Never make a final budget until after the first two months of school. You can't really judge needs completely. Dashed expectations lead to fights. Just estimate and stay flexible.

* In your enthusiasm, don't buy new clothes for your student. Have him or her start wearing the essentials and figure out what is missing from the wardrobe after its been determined what's needed. Also, consider garage sales, friends and relatives for hand-me downs in good shape. This can leave more money for really important things.

* Consider online banking in which you, as the parent, have equal access to the account. Many banks now offer online banking capability, which offers much faster money transfers and also allows you to more quickly “monitor” cash outflow.

* Communicate by e-mail or with a written, not a verbal, rendition of the monthly expenses.

* Don't expect freshman budgets to look like senior budgets. Things change with inflation, needs and job schedules.

* If at all possible, your student should take a job that will enhance his or her future career. A volunteer summer job at the state aquarium will get the budding oceanographer further in the long run than four weeks of asking, "Do you want fries with that?"

Copyright 2001 by Diane Helm