Money management is one skill that can be difficult for young adults to master as they head off on their own. But no matter what stage of life - whether they're entering college or the work force - every young adult should learn how to handle their money.
Establish a Budget
Sit down together with your student and map out all monthly expenses. Include room and board or rent, books, supplies, food, personal care and medications, transportation, gas, entertainment (including dining out, movies and walking around money, etc.), and payment for phone, mobile devices, cable and Internet access. Then, figure out income. This can include money from a job, financial aid, student loans and any support from you.
Income and expenses need to balance. There are plenty of online tools you can use to figure out a budget. Some, such as www.Mint.com or some bank websites, can help students manage their budgets, making it easy for them to take care of it themselves. There are also budgeting tips and worksheets at websites such as www.SmartAboutMoney.org.
How to Stick to the Budget
Prioritize needs vs. wants. It may seem like a latte every morning is a necessity to jump-start the day, but those kinds of little expenses can add up quickly. A recent study by Westwood College found that 40 percent of the average student's budget is being spent on "discretionary" spending; included in that is entertainment (6.5 percent), apparel and services (6.7 percent), travel and vacation (4.7 percent). Have your student do the math on how much some of their "necessities" will cost them, and then talk about how to weigh purchase decisions.
Find ways to spend less. A little planning can help young adults spend less and get more value for their dollar.
- Cellphone - Avoid overage charges with an unlimited plan. For example, with Cricket Wireless, you can pay an affordable monthly fee for all-inclusive talk, text, data and music rate plans for some of the most popular smartphones available. Cricket also includes a service called Muve Music that gives students unlimited song downloads as part of their plan. Learn more at www.MyCricket.com.
- Food - Coupons and digital deals can cut the costs of dining out. Look into the college meal plan - and use it. Save on snacks by stocking up at the grocery store instead of buying from a vending machine or convenience store.
- Clothing - Thrift stores, consignment shops and yard sales are affordable ways to find something fun to wear.
- Entertainment - Encourage them to take advantage of free activities on campus with their student ID. When going out with friends, advise your student to decide how much he or she can spend, then only take that much money with them.
Be smart about credit cards. Many students sign up for a credit card right away, and before they know it, they are thousands of dollars in debt. Make sure they understand the impact of interest rates. Also, discuss setting limitations on using a credit card to avoid non-academic debt, such as using it only for emergencies, travel or school expenses, or only charging what they can pay back on time the next month (including interest).
Equipping your student with some basic financial skills will help them make wise money choices now and for the rest of their lives.Photo courtesy of Getty Images