The biggest freshman class ever is off to start earning a college degree in a few weeks. But there's one big issue that many parents have yet to resolve: How much should they give their kids for spending money?
It can be mind-boggling to think that the collegian will require even more dough after you've paid thousands of dollars in tuition, room and board, purchased a new computer, and budgeted for books and transportation. How much can a teenager really need, other than necessities like toothpaste and shampoo?
A fair bit, it turns out. Toiletries, printer cartridges, dorm decor and school supplies can take a chunk, for starters. And while many campuses are teeming with dining options (including food courts) and cheap entertainment, students want to go out occasionally to see a movie, shop, go on a road trip or just take a break from the monotony of institutional food. "You don't want to be the kid who sits in the dorm room and does nothing," says Joe Richards, who will be a sophomore at Ferris State University in Big Rapids, Michigan this fall.
Even if your student has a generous financial-aid package, these costs most likely will be borne by one of you, since most packages require some combination of parent contributions, loans and student jobs. For parents, the challenge can be finding the right balance between being too frugal and too frivolous — providing, perhaps, enough money for your child to eat, but not quite enough to drink.
Because college is a great time to learn budgeting and other financial skills along with serious academic stuff, this is a good time to outline expectations and agree on limits. Here are some suggestions:
Start talking before money becomes an issue. If your child will be expected to earn some of her spending money, make clear how much is expected upfront, and consider a backup plan in case illness or exams require missing a week of work. Some Michigan colleges discourage freshmen from working during their first semester so they can adjust to the workload.
In addition, you'll want to discuss what the allowance is supposed to cover. Will you pay extra so your Southerner can buy winter clothes? Who pays for the shuttle to and from the airport or the gas for a trip home?
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.
Estimate a budget. To start the "how much" conversation, look for the "cost to attend" chart on the school's Web site, often found in the financial-aid or admissions pages. There, you'll find the amount factored in for "personal expenses" in financial-aid packages. (These amounts are in addition to books, which most schools budget at roughly $500 per term.)
Depending on the school, those amounts may be generous or tight-fisted. Ferris State University budgets $1,000 for personal expenses, but calls that "a conservative estimate, which will require careful budgeting on your part." Surprisingly, New York University budgets only about $1,000 a year for expenses, despite its pricey New York City location. An NYU spokesman says the amount needed "is not less than that, and may be more."
By contrast, the University of Kansas, in the hopping town of Lawrence, estimates personal expenses at $2,272 a year. The University of California-Davis surveyed its students to come up with its estimate of $1,308.
Whether your student's budget falls within the typical estimate of $1,000 to $2,000 will depend on his eating habits and extracurricular activities — and your willingness to fund them.
At $200 or so a month, however, your child still won't be living large. Ms. Richards, the Emerson student, receives $100 a month from her parents and earns an additional $120 from a campus job, and watches her dollars carefully. When a group of her friends went to Cheesecake Factory to celebrate the end of last fall's semester, the bill came to $30 a person — a week's paycheck. "We were all in shock," she says.
Paper or plastic? Your student will need a checking account for basic needs and should 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.
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. Students should be responsible for their own accounts, paying their own bills and learning the ins and outs of credit limits, minimum payments and due dates.
They may need some time to get the hang of it. Emily Roth, who will be a sophomore at Emory University in Atlanta, had trouble remembering the due date at first — until she got hit with a late fee. "I set up an email alert after that," she says.
Email alerts also can be set up to warn when the charges are near the card's credit limit and to let students know when their checking account balance is low. The student can also set up an automatic monthly payment from a checking account so that at least a minimum amount is paid each month, which helps to avoid late fees.
By: Karen Blumenthal
Wall Street Journal; August 17, 2008
