Office of Student Aid : Parents of Students : Parent Newsletter

Volume 5, Issue 5--September 2007

Money Watch -- Student Budgeting Basics

As students settle into a routine for the new academic year, stocked with supplies from home, they may not be considering a budget for the semester. However, as the semester wears on, and they find themselves dipping deeper and deeper into their available funds, budgeting will become a lot more important. Managing personal finances--in particular, learning how to determine what is and is not a necessary expense--is often a new challenge for college-bound students. For example, most traditional college-age students think they know how much household items and groceries cost. However, a trip to the grocery store can be a real eye-opener. Students are often unpleasantly surprised to learn that most groceries, especially the healthier choices, are not in the same price range as boxed macaroni and cheese dinners!

Here are a few suggestions to help your student develop an effective budget for this academic year.

1. List Available Income

Make a list that includes amounts of money available from some or all of the following sources (as applicable):

• Funding from designated college savings plans
• Student savings allocated to college expenses
• Student take-home pay from work/Work-Study--if your student has a Federal Work-Study or a wage payroll position, have him or her estimate his or her expected monthly earnings
• Contributions from family--if you will be supplying an allowance to help your student with his or her expenses, be clear with the student about the total amount you are able or willing to contribute
• Financial aid (loans, grants, scholarships, etc.)

2. List All Anticipated Expenses

Necessary Expenses

• Payments on prior debts, if applicable
• Tuition & fees
• Room/rent
• Board/food
• Textbooks/supplies for classes
• Other school-related expenses
• Miscellaneous bills (electricity, water, etc.)

Not-so-necessary Expenses

• Convenience bills (magazine subscriptions, cell phone, cable, high-speed internet access)
• Entertainment
• Travel
• Gifts
• Organizational dues
• Clothing beyond that which is essential for warmth and modesty
• Toiletries beyond those that are essential for personal hygiene

3. Prioritize Expenses and Modify the Budget, If Necessary

If you discover that your student's anticipated expenses will exceed his or her available funding, work together to identify ways he or she can either increase income or reduce costs in order to stick to the proposed budget.

Suggestions to Help Your Student Reduce Expenses

• Your student could plan the timing of long-distance phone calls in order to take advantage of low-rate hours or free cell phone minutes.
• Your student might consider using e-mail to stay in touch with family and friends inexpensively.
• To make money management easier, your student might choose to open a bank account in the city or town where his or her Penn State campus is located. If your student gets an ATM card, make sure he or she is aware of the fees that may be charged for using the card at other bank ATM machines, which can add up quickly. Also, be sure your student investigates the minimum balance required, fees for using other ATMs, and per-check or electronic transaction charges.
• Your student could choose to buy used textbooks for classes, if available; however, he or she should plan to shop early, since used textbooks usually sell out quickly.

Suggestions to Help Your Student Increase His or Her Income

• Your student may want to consider a part-time or Work-Study job (if eligible). Studies have shown that students who are employed part-time while in school (20 hours or less) often earn higher grades than those who don't, since the requirements of balancing work and studies usually results in more efficient time-management and organizational skills.
• Students can apply for private scholarships to help with their costs.

It's important to establish an open dialogue with your student when it comes to finances. Students are more likely to manage their money successfully--and ultimately have less student loan debt--if parents offer early assistance with budgeting and financial strategies.