How to set a college freshman’s budget

Ask NJMoneyHelp

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Q. My daughter is graduating from high school and we need to get her on some kind of budget for college. We have no idea how to start. She will have a meal plan but will want money for pizza, coffee and stuff like that. Plus for going to the movies or whatever. How much is a good amount?
— Mom

A. It’s terrific that you’re trying to plan ahead rather than just wing it when school starts in the fall.

On top of the thousands of dollars we are paying for tuition, room and board, fees, meal plans, computers and books, it can be very hard to imagine that your student will require even more money, said Lisa McKnight, a certified financial planner with Lassus Wherley in New Providence.

How much can a teenager really need, other than necessities like toothpaste and shampoo?

Probably quite a bit, McKnight said, and the answer can be different for each student and family.

“Freshmen will need money for personal items such as toiletries, dorm accessories, school supplies, cash for the laundry room, as well as money for outside meals, snacks and entertainment (movies or a concert),” she said. “Even if your freshman has an unlimited meal plan they certainly will want to break the monotony of institutional food with a meal out with friends now and then.”

These costs are not covered in any financial aid package and will be borne solely by you and your child. Because college is a great time to learn budgeting and other financial skills along with academic matters, this is a good time to outline expectations and agree on limits, she said.

McKnight said you should start by having a conversation with your child. If your child will be expected to contribute by earning some of their spending money, make clear how much is expected upfront, and how they plan to earn this money.

McKnight said you will need to discuss what the allowance is supposed to cover. Who pays for what? Will the allowance cover all personal expenses or will you the parent pick up items such as transportation and clothing?

Next, estimate a budget. There is no “typical” spending amount for college students, McKnight said.

“Theoretically, those who live in a residence hall and have a full meal plan would not have more than incidental expenses,” she said. “Nevertheless, some students hang out at coffee shops between every class, meet friends for pizza, and go out to a concert or movie a couple of times a week. Their expenses quickly mount up.”

Then there are others who discover they can live quite frugally by socializing with next-door neighbors in the residence hall, drink more than enough coffee in the dining center during meal hours and check out videos from the hall office for entertainment, so their daily spending needs are minimal, she said.

“And some students are simply accustomed to spending money more freely than others,” she said. “You and your child will have to discuss these expectations and set a feasible budget.”

Ask your student to put together a draft budget for the first month. Have them include what they expect to spend on coffee, movies, activities, etc. then add a 10 percent contingency to the top, McKnight said.

“Have them monitor the amount and make adjustments if needed the following month,” she said. “After a few months you and your student will have a good feel for what their typical spending pattern looks like.”

If you are still having trouble constructing a budget, McKnight said, most college web sites factor in personal expenses at roughly $500 or per semester or approximately $100 per month. Expect more expenses at the beginning of the semester and the beginning of college.

Some first year expenses to consider:

Before classes start
• Books and school supplies
• College / spirit wear, such as sweatshirts, T-shirts, and room décor in college colors
• Accessories and supplies for their dorm room

First weeks of classes
• Exploring the city beyond the campus
• Shopping and dining out with new friends
• Purchase of school supplies not anticipated earlier
• Personal care costs
• Weekend activities

Other first-year expenses
• Unplanned trips home
• Fees for texting or cell phone minutes beyond contract limits
• Replenishing toiletries
• Extracurricular activities

Then you have to talk about who will pay for it all, and if your child help fund their expenses.

McKnight said you should encourage your student to supply their own spending money as much as possible.

“Many students start college with a nice nest egg they have funded with employment and gifts,” she said. “If the student has their own savings, they should carefully budget and track expenses to ensure accumulated savings lasts as long as possible.”

In addition to savings, they can also consider small part-time employment or summer employment to help fund their expenses, she said.

“Students should consider their education to be their first priority, but a part-time job can have more benefits than just the paycheck,” McKnight said. “Many times the structure of a work schedule helps them manage their time better. If they know they have to work on the weekend, they will not procrastinate on their homework during the week.”

Students who work on campus can usually find a job close to their residence hall or near their classes, she said.

Then you need to talk paper or plastic.

McKnight said your student will need a checking account with an ATM feature for basic needs. You’ll also need to decide whether to put a semester’s allowance in the checking account upfront, deposit money monthly, or add funds only as needed so your student can budget accordingly.

Your student should also have a credit card for emergencies.

“If you share your card, agree in advance what it can be used for and how you’ll be alerted,” she said. “Sooner or later, your student should get a credit card in his name to establish a credit record, and getting a card may be easier as a student than later on.”

She said students should be responsible for their own accounts, paying their own bills and learning about credit limits, minimum payments and due dates. Email alerts should be used to warn when the charges are near the card’s credit limit, if a charge as been made over a certain dollar amount or when payments are due.

“No matter how much you fund or what method you use, it will be important for both you and your student to not only set the budget and boundaries, but to monitor expenses, make budget adjustments and get back on track if necessary,” McKnight said.

Good luck!

Email your questions to moc.p1490603549leHye1490603549noMJN1490603549@ksA1490603549.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.