Planning for college expenses is generally focused on the big-ticket items like tuition, housing, and study materials, but planning for a spending money allowance is also deserving of some forward thinking. It is important to set expectations with your child about what you will be contributing to their college career for both the large expenses and small, so that terms can be created and agreed upon and also to teach your child as early as possible the value in creating and sticking to a budget. Doing this well in advance of their high school graduation also gives them a chance to earn and save money that can be used in college. Setting ground rules and expectations for a spending allowance in advance of them starting undergrad sets them up for success and gives them a chance to understand the rules, ask questions, and contribute to their own pocketbook.
Factor in Borrowed Money
If it has already been established that your child will be taking out student loans with a private lender in order to pay for their education that is important to consider when discussing spending money allowances. Perhaps you will not be able to contribute to your child’s tuition but adding to their spending budget is manageable for you. Have an open conversation with them about what taking out a student loan from a private lender will mean for them long term, and help to educate them on why it is often smarter not to include spending money in your total amount borrowed, and how you can help with that. Providing an understanding of how things like interest rates, deferring payment, and using a cosigner will all affect their loan is a way to contribute to their college experience when your pocketbook can’t support the cost.
If your child is leaving the house for college, then how they spend their money will be out of sight for you, but likely not out of mind. You already know your child’s habits when it comes to spending and how they value money, now is the time to teach them about a budget and remind them that once funds are depleted for the month they will not be replenished and what budgeting might look like. Helping them as early as possible to exercise intention and discipline with their spending will serve them long term and can also generate a sense of pride in them when they are able to successfully handle their own expenses.
Revisit Your Budget
Once college is underway it is a good idea to revisit the budget that has been established at least annually. After your student has been enrolled in school and living the student life for some time you will have data to support any changes that might be necessary. Being able to sit down with your student and show them in black and white what their habits are will be a great learning opportunity for them and help to keep the lines of communication open between you two.