Do they really need an allowance?
Financing a college-aged child can be a tricky journey. Most parents want to walk a fine line between allowing their child to be independent, protecting their own wealth, and ensuring their child can focus on their studies and succeed. Whether or not a college-aged child needs an allowance is dependent on several factors. Before you send your child off to a college campus, it’s important to sit down and discuss potential expenses with your child, how those expenses will be paid, and what is expected of your child while they are on campus.
Can you afford it?
Everyone wants to give their child all they can, but if you can’t afford to bankroll their on and off campus activities, you need to be honest about it. Before you discuss spending with your child, sit down with your own budget and see what money is available for allowances. Your wealth management is vital as you head into your latter working years and your retirement years. Once you know what you can afford to give your child, setting a budget for them will be easier.
Can your child get a part-time job?
Consider where your son or daughter will be going to school. If they are in a large city, with easy access to transportation, a part-time job may be a viable option. If they are living on a rural college campus, coming by employment opportunities won’t be easy. You’ll also need to consider your child’s major and course load. A difficult major or heavy course load will require them to spend much of their free time studying, making working difficult. If a part-time job is a viable option, you may be able to skip a regular allowance and just supplement your child’s income when things seem tight. If a part-time job isn’t possible, you might want to consider setting an allowance.
What is a reasonable amount of money?
There is no set answer to this question. What type of money your child will need monthly will depend on what they plan to do on and off campus, and where they are going to school. Kids at large, urban universities will have more opportunity to venture off campus, while rural campus dwellers are generally going to stick close to their dorm. Anywhere from $100 per month to $500 per month may be acceptable depending on their activities and plans.
Create a Budget
Craft a budget with your teen for things like entertainment, off-campus dining, transportation, and supplies. Set a dollar amount for each category and then help them scale the numbers back to an amount that you are comfortable with. You can use an app like Mint to keep track of their spending if you’d like.
Set expectations for your child
Once you have a budget, you’ll need to lay down ground rules with your child. If they are leaving home for the first time, you’ll want them to know that you trust them, but that the discretionary spending does have rules. Each parent/child relationship is different, so you should set standards that make sense for your dynamic. Some parents may expect their child to keep up a certain GPA during each semester, while others may request access to their online banking to keep tabs on spending. The rules you set should make both you and your child comfortable.
Navigating your child’s college years while keeping your wealth management goals in place may seem like a difficult task. Planning, open discussions, and regular check-ins, however, can make the process a little easier. If you have any concerns about your wealth management during this process, it is best to speak to a professional about your current plan and budget.
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