Taking to Kids about Heading Off to University/College Part 1 (of 4)
Are you shipping your kid off to college or university this fall? Well, you’re just about out of time to get your last licks in when it comes to making sure they know how money works. Here are some things you should think about covering before you jettison them from the nest.
1. How will they manage their money? Whether you’re helping them financially, they’re paying for school themselves, or they’re getting student loans, they’ll have to manage some money. If you haven’t had the budget discussion yet, get going.
I have two worksheets that can be downloaded that will help see both the big picture, and manage the day-to-day details. Download ‘em and use them to have a chat about the money.
They can use the Managing Your Lump-Sum Money Worksheet to enter all the money they’ll have from summer work, scholarships, bursaries, RESPs, gifts from family and loans, along with any other money they can manage to scrounge. This is an important first step since this is usually more money than these kids have seen in one place, and the temptation is to think it will never run out. Using this worksheet, they can anticipate where that money will be needed.
The Student Cashflow Worksheet is the other download that will help students figure out where their money is going to go. Unlike a regular budget, the cashflow is divided into 24 columns. The blue columns show what you plan to spend in any given month, while the white are for what you actually spent. The cashflow approach acknowledges that students’ spending will vary by month.
When my daughter did her first cashflow, I looked at the September numbers to see how she’d broken them out. I commented that I didn’t think she was allowing enough for laundry.
“Hey,” she said, “it’s a cashflow, remember.”
“What?” I asked, puzzled that she was calling MY attention to this. I’d made up the thing.
“I only put $10 in for all the month I know I’ll be home and can do my laundry here. For all the other months, I put in twenty bucks.”
“Ahh,” said I smiling. Apparently I’d underestimated her once again.
If you don’t bother to have this discussion with your kids before you ship ‘em off to school, you shouldn’t be surprised when they blow through their money and start hitting you up for more. This is, after all, their first opportunity to take care of themselves, and there will be trips and stumbles along the way. But having a clear plan means if you do have to pony up with some mac and cheese, it’ll be a short-term thing until the next month’s money comes into play.
Next -- Part 2: contracts, impulse control and credit cards.