You may think that because your student doesn’t earn a lot of income they really don’t need to budget, but, on the contrary, it’s the perfect time for a student to learn money management skills that will help them through the rest of their adult life. Even though you have a budget, you may feel a little unsure of how to actually teach your student how to create one. Here are a few important tips when starting to budget.
1. Discipline – This is the most important part of budgeting! You can purchase software or use free budgeting tools from the web, and think you have it all together, but you have to stick to the limits you have set for yourself.
2. Income vs. Expenses – This doesn’t have to be anything fancy; get a piece of paper and write down the income and expenses for the month. The goal is to have enough income to cover your expenses and put some money into a savings account. If the student isn’t working but is receiving a set amount each month from home, count that as income. Expenses may be dining out, going to the movies, or buying their new favorite UK t-shirt. Keep in mind, expenses aren’t a bad thing, as long as you have budgeted for them.
3. Keep track of your balance – Yes, having online and mobile banking are good resources to know activity on your account, but the best way for you to know your balance is to keep track of it yourself. Why, with all the technology available? If you only depend on online banking or your ATM receipt to know your balance, it is possible for you to overdraw your account because that balance doesn’t reflect pending transactions, leading you to believe that you have more in your account than you actually do. Most transactions don’t clear your account in real time, and you may have a 2-3 day delay for them to affect your account balance.
You can use a good old fashioned check register, a computer program, or even an Excel file. You’ll have to decide which way is best for you. When you use your debit card or write a check, record the transaction and assume it’s gone…even if the money hasn’t cleared your account yet.
You may also find it helpful to discuss your household budget with your student to show them a real life situation and how quickly income can go to all the necessary expenses.
For more helpful financial education for you and your student visit the “Advice & Education” page at www.ukfcu.org.