Budgeting Tips for College Students: A Parent’s Guide
They grow up so fast! Your child is becoming an adult, and it’s time for them to take their first step into the adult world: college. As they learn to be independent, they may be shocked by all of the real-world learning they’ll do as they earn their degree, especially some hard lessons about money.
To give them more time to focus on their classes, enjoy their newfound freedom, and avoid the potential shock of financial independence, help them start their experience with a quick lesson on budgeting and saving.
Not sure where to start? You came to the right place! In this guide, we’re going to cover ways you can prepare your college student for saving, budgeting, and staying motivated toward financial freedom.
The first step in building financial independence is opening a savings account. Saving money doesn’t need to be hard, and this is a great, low-stakes first step to prepare them for future saving habits.
Setting savings aside in a separate account helps eliminate the temptation of dipping into what they’re hoping to save for later.
If you’re able, work together to find a high-yield account. When your student puts money into a savings account, they’ll earn interest on everything they set aside, which is essentially free money! Encourage them to save toward the things they want in their savings account and use their checking for day-to-day spending.
Do they need a better plan for saving month to month? Introduce them to the 50/30/20 rule!
The 50/30/20 rule calls for using 50% of income for necessities, 30% for discretionary spending, and 20% for savings and debt repayment. This isn’t a hard and fast rule; if they call you freaking out that they can’t save that much, tell them to set aside what they can and assess what they’ve spent to meet their saving goal the next month.
Besides helping your student set up a savings account, you can also walk them through creating a budget.
A budget is a great tool for college students to use as they begin to track their spending. It’s a habit that will help them not only become financially independent but also financially resilient.
Teach them to list expenses, so they have a snapshot of where their money is going. They may be surprised to learn how much their subscription plans cost, how much they spend on gas, or what all of that eating out does to a savings account.
Start by helping them estimate and calculate monthly expenses. This is a great time to teach them about fixed and variable expenses. It may help them make more sense of when to order takeout or make the best of dining hall dinners.
A great way to help them out with their budgeting is by sharing a budget spreadsheet with them.
Take care of all the formulae and columns so they can enter their earnings and expenses easily. It works much the same way a planner or journal does. All it takes is a little bit of plugging and chugging.
As soon as your student gets their first college job, they may feel ready to open their first credit card. There are tons of credit cards geared directly toward students so they can start their credit history and begin establishing healthy credit.
In college, it’s easy to build credit with minimal risk, and it can be great to have a credit buffer when they eventually need to pay off loans. However, be very mindful of informing your student about predatory interest rates and credit practices. Though “student credit cards” may be tempting at first, the fine print can often go unnoticed.
In addition, it’s important to teach them the importance of clearing their balance. If they use their credit cards for small payments and pay them off each month, they’ll establish credit with minimal interest payments. Large purchases generate more interest, so advise them to steer clear of splurging on credit.
This may be totally new for your student! Offering them some tips or helping them work through statements might be the support they need; however, it’s also important to create some healthy boundaries.
Too much hovering may stunt their independence or make them feel like you don’t trust their judgment. Healthy space allows them to make mistakes (which they inevitably will do), but if you establish a safe environment around discussing finances, they may be more comfortable coming to you for help when they need it.
It may be a good idea to establish times to talk about their finances and financial goals, like at the end of the month or every other Friday.
This way, they can bring up any concerns they have themselves. If you need to, ask them if they have questions. Above all, though, try to be respectful of their privacy.
Early adulthood is the best time to start practicing financial literacy. As they grapple with financial aid and loans, they’ll need to adjust to being financially minded and quick! There are a few things you can suggest to your college student to help them make sense of their financial independence.
First, talk to them about saving decisions you’ve made or are currently making.
You’re their first financial advisor, and being transparent about these decisions builds trust. It models healthy saving behavior that they can replicate, too.
Second, you may suggest that they take a personal finance course. Many colleges offer these courses, and adding this to their schedule may be incredibly beneficial for them. However, if they can’t quite fit this into their schedule, there are plenty of free courses and resources available online, so do your research and suggest a few they can use.
SaverLife, for example, is a free tool that can break down the ins and outs of saving and even rewards them with cash for making good financial decisions!
Common sense isn’t always common!
This is your student’s first time doing a lot of this stuff on their own, so it might help to give some day-to-day tips for finances that seem commonplace. They’ll appreciate these little tricks as they make their way through college life.
As college students, they can take advantage of a ton of student discounts! These may be for subscriptions, transportation, and even some of their favorite clothing stores. If they’re looking to make large or consistent purchases, remind them to check for a student discount to shave off some money they can use elsewhere.
They can also save a lot on their college expenses.
If there’s an option to rent books or use the library, remind them to do so instead of buying the books outright—they can always use sticky notes for annotations. They might even be able to get a discount on a computer at their college or borrow one from the library if they need it.
Have them use their meal plan to the fullest to stretch their food budget. A coffee machine is an easy addition to a dorm, so they can opt for that instead of buying coffee every day.
They may roll their eyes or groan and grumble at first, but by the end of their first month, you’ll get a thank you text for telling them how to save on groceries.
Walk the walk!
If you want them to practice saving, save with them. If you make it a shared activity, you have an added excuse to keep them accountable. Plus, it’s a great way to connect while they’re away for school.
If you’re saving with them, you can support their savings journey directly. You can match the savings they gather to incentivize them to save more (you’ll have to keep up, though, so be sure you know what you’re getting yourself into). Or, let SaverLife reward them with cash prizes for setting aside money so that you don’t have to!
Help them set aside money for things they’re looking forward to, like spring break or moving into a place of their own after a bad dorm experience.
You can even participate in saving challenges with them. If they’ve decided to challenge themself to one of many monthly saving challenges, you can do the same.
Just because you’re teaching them to save doesn’t mean you can’t do the same for your empty nest.
There are many ways to help your college student start saving, and you definitely don’t have to do it all alone!
There are many resources to reference when they begin their journey. SaverLife has blog posts for parents to use as resources and guides, or you may direct them to the site for self-directed learning!
SaverLife is another great tool for incentivizing student savings.
It doesn’t just reward students for good financial habits; there are also a ton of great folks in the SaverLife community working on their own saving journey at the same time. Your student can use the SaverLife forum to ask questions and find answers about how to start saving.
Interested in SaverLife? You can have your college student download it today!