Getty Images Image by: Getty Images
Here are Cheung's suggestions for getting your post-secondary student on board with budgeting.
Income and expenses
"The first step is to talk about how much money they'll have to spend," say Cheung. "What are they earning? How much is coming from parents?" Once you establish how much money your child will have each month, it's time to look at costs. "You really have to sit down and talk about this," says Cheung. "Because they've been living at home, they may not necessarily be familiar with all the costs." You'll want to discuss the costs associated with room, board and transportation, for example.
Needs versus wants
A large part of that costs discussion should include analyzing needs versus wants. Actually make a list, suggests Cheung. "So your child needs to pay for food, rent, books, tuition, maybe transportation and an emergency fund for unexpected costs such as surprise fees," he says. "Then you look at the ‘wants' such as going out to eat, movies and other entertainment." Those things, he points out, might not fit into the budget quite the way your child would like. So the trick is to work it out to find a balance of needs and wants. For example, maybe dinner out is limited to once or twice a week, or movie night moves to a day of the week when admission prices are discounted. "Based on that," says Cheung, "make a blueprint—either weekly or monthly—and have them stick to those guidelines.
Track the spending
Use a budgeting app or make an Excell spreadsheet and have your student track their spending. "You want to make sure you know where the money went," say Cheung, "then you can adjust your budget as needed. Maybe you need less for travel and more for food, for example." And if your student is blowing their budget, keeping track of the actual spending will quickly reveal where the money is flowing.
Cash or credit
Though it might be tempting, resist getting your post-secondary student a credit card right off the bat. Debit, says Cheng, is a better idea. "By using cash or debit, the spending is limited by the actual bank account," he points out. "You can only spend what you've got. It's a better life lesson." Once your student is used to budgeting and living within their means, then you can consider letting them get a credit card. "It's good for emergencies and to establish a solid credit history," Cheung says. "Just set a very low limit to start and make sure they pay it off every month."
In the end, your child ends up with both a post-secondary and a financial education.
For more back-to-school tips, visit our back-to-school survival guide.