Better budgeting for college students

By Scott Reeves

updated 1:43 p.m. ET Sept. 27, 2005

NEW YORK - Many college students have little or no experience handling money and find the prospect of sticking to a budget more daunting than a year of calculus because the numbers never pencil out.

It's not too late to give your student "the talk" about money.

"Parents don't want to deprive their students, but need to set the stage for open, frank communication about money," says June Walbert, a certified financial planner at USAA Financial Planning Services in San Antonio. "I encourage parents to let kids know that college wasn't so long ago for them, and they understand the challenges."

Walbert urges parents to start with the basics when drafting a budget.

Have your student sharpen a pencil and write down the monthly cost of tuition and fees, books, room and board, utilities, food, public transportation, personal car, entertainment and extra-curricular activities.

Cut the expenses as fine as possible to give your student an accurate picture of the monthly costs of attending college.

For example, transportation might include the car payment, gas, insurance, maintenance and parking. If your student doesn't have a car, include public transportation fares. Personal care could include such things as haircuts, shaving cream, razor blades, toothpaste or makeup. And don't forget clothes. Entertainment includes all of the undergraduate diversions — eating out, movies, sporting events, concerts and music downloads. Extra-curricular activities might include intramural sports, special interest clubs and school-related trips. Don't forget newspapers and magazines.

Next, determine the source of the funds needed to cover monthly expenses. Chart the amount from various sources, such as parents, scholarships, grants, student savings and on-campus work. (See "Shopping For Financial Aid.") If you're short each month, ask two basic questions: Where does the needed money come from? And, what spending cuts can be made?

It's a good idea to have your student use a portion of summer earnings for tuition and books. This underscores the cost of a four-year degree and gives the kid a stake in completing the coursework. If your student works part-time during school, discuss how the money will be split between school expenses and fun. (See "Start Saving For College Now.")

Think about the type of bank account your student will have at school. Joint accounts are a good way to monitor spending and to make sure bills are paid on time.

Walbert urges parents to think about who will pay the monthly bills. Many students will make mistakes in handling money, but you want the mistakes to be small. If your student has little or no experience handling money, it might be wise for the parents to write the rent and tuition checks. If your student handles money well, it still might be smart to deposit the tuition and rent money in your student's account a few days before it will be needed.

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