Financial Planning for your Student!
September 28, 2018Building Your Future
Your son or daughter has been accepted to the university or college of their choice and soon they will be leaving the nest and starting a new journey both educationally and financially. If you are providing financial assistance to your children for their post-secondary education, below are a few tips from a Globe and Mail article to help with your student’s financial plan for the coming school year.
1) Make a budget.
Take the process seriously by breaking down realistic spending categories and detailing what is expected to happen in the eight months of a school year. A budgeting exercise needs to be thorough; even a simple line item like school supplies can be thrown off by a year’s worth of unplanned $60 printer cartridges.
2) Draw up a spending plan.
Ask your child to develop a detailed spending plan. Have them figure out how much they expect to spend on rent, utilities, food, entertainment, travel expenses and textbooks. Once they have done that, have them present it to you. If you are the banker, you have the right to demand a business plan and to critique it.
3) Revisit the budget.
Every plan should have updates, and parents would do well to get a financial update at Thanksgiving. Those heady first six weeks of new demands, friends, and a restructured life can play havoc with finances. The reality of that time is an important financial-planning lesson in itself.
4) The credit card conundrum.
Credit cards are not inherently evil. Nor are they avoidable later in life, so introducing them now can make sense, unless there is a serious question of your child’s fiscal rectitude or judgment. Treat them as a useful tool that must be used with restraint and paid off monthly by setting firm ground rules. The fact that they make it easy to track spending can be a bonus for parents.
5) Lump sum or stream of payments?
Handing your child a lump sum doesn’t leave much room for mistakes or poor judgment. If your child is going away to school and you are helping fund them, a stream of payments makes more sense. It provides periodic accountability, which only helps encourage discipline, while ensuring that any mistakes can be learned from.
6) Taking on debt.
As with other major investments, education can involve debt. A structured payment program can help control this and put it into context. Sit down with your child, plan out the potential total debt load, and talk about how it will be paid off in the years after school. This kind of approach can go a long way to instilling frugality early on in life.
Parents and students looking for further information can check out the Investor Education website on getting an education, which includes links on everything from living on a budget to what kind of financial aid is available. Their university cost and debt calculator allows students to get a long-term view of the eventual cost of their degree and the implications of paying it down.Original article written by Roma Luciw for the Globe and Mail.