Q: Our son is going to university and for the first time will be responsible for managing a lot of money. We have tried to go over a budget we prepared, but he thinks we worry too much; do you have any suggestions?
A: This is normal behaviour, in his own way he's telling you he wants to look after his own finances. The reality is that he will have thousands of dollars at his disposal and if he doesn't manage it carefully he will run out of money.
Your guidance will be valuable as he has never been in this position before. Consider using a holding account strategy:
- Develop a budget that includes monthly expenses as well as one-time expenses such as tuition and books; don't forget to include a little money for fun.
- Set aside any education money he has in a separate account so that he's not tempted to spend it all at once.
- Suggest that he pay himself a biweekly amount, based on his budget, into his regular bank account. This would be like his paycheque.
- He also may choose to supplement his bi-weekly income with some part-time work while attending school. This would not only beef up his resume, but could lower his long-term educational costs as well.
Encouraging your son to develop his own budget will help him distinguish between his needs and wants more realistically. He may also want to consider:
- Ways to cut down on expenses; e.g. scaling back cell phone features, avoiding eating out more than necessary, etc.
- Tracking where he is spending his money in order to stay within his budget
- Using credit cards for emergencies only and always paying the balance in full. Emergencies do not include "pub night."
- Staying away from long-term contracts as a lot can change while he is a student
As part of your discussions, outline what financial help, if any, he can expect from you. Many parents have been caught off guard as a result of their kids running out of money before the end of the year. By setting the ground rules upfront you won't end up co-signing a crisis loan or saying goodbye to your holiday fund.
While he might not be able to live the lifestyle of his dreams right now, his education will get him there faster.