Money

College budget 101: Get your child on track

So you think your 18-year-old is ready for college. You've prepared him with all the basics. Armed her with all the stuff she needs. Shower caddy? Check. Alarm clock? Check. Mini-refrigerator? Check. But how about basic financial strategies?

"I tell parents that if they send their students to college and they've never discussed their credit card APR, if the student doesn't know what that is, then it's time to have a conversation," says Tally Hart, senior adviser at Ohio State University.

According to the College Board, parents can bank on shelling out an average $12,127 for tuition, room and board at public colleges this year. But there's another $3,000 likely to be spent on textbooks, supplies, transportation and "other." And students themselves will often be responsible for budgeting that money themselves. So how do you keep your freshman from draining his bank account by the end of the first month? How do you make sure she hasn't — by Thanksgiving — plunked thousands more onto a credit card?

Pause, then plan: Your first instinct may be to create a budget before you even pack up the car, but that's the easiest way to leave things out. Instead, at the start of the semester, have students record their purchases. "We encourage students to keep a financial journal for at least six weeks, writing down every penny they spend. That way, they'll find out how much they are spending at Starbucks or Caribou — money that could be used for a better outcome," says Hart. Once they know where all those twenties are going, it's easier to cut back on unnecessary buys, as well as budget for those that are often forgotten.

Armed with information, create a budget: Your child will need (with your help) to figure out how much total income they can count on each semester, including money from scholarships, loans, financial aid, employment and, of course, you. Subtract the cost of tuition, room and board (if those come out of the student's account rather than yours); textbooks and supplies; and any reoccurring expenses (monthly bills, transportation, health care and groceries). Then, using that financial journal, start distributing what remains. Carmen Wong Ulrich, author of "Generation Debt," advises: "Work fixed expenses into your budget first, and then whatever you have left, those are flexible expenses. So whether it's eating out, going out with friends, buying clothes or that sort of thing — those you can play with a little bit, and kind of cut and paste that money as to where you're going to need it more."

Don't pay the bank: In your teen's mind, a couple bucks for an ATM withdrawal may not seem like a lot, but when added together, they can hit a carefully planned budget below the belt. Banks charge, on average, $1.50 for debits by outside customers, according to Bankrate.com. Add that to the $1.50 charged by the student's bank, multiply by two withdraws a week, and nearly a $100 a semester is gone. Avi Spivack, co-founder and managing editor of the "Students Helping Students" series of guidebooks, including 2005's "Getting Through College Without Going Broke," advises, "If you're in a place where you don't have your bank nearby, take out more than you need for that particular time period. That way, at least you're getting your money's worth." Better yet, when you set up your bank account for the school year, make sure it's with a bank that has ample ATM access. And if you don't have cash handy, use a debit card — not credit — to make purchases. You'll use less cash and go to the ATM less often.

Keep credit to a minimum: Credit card companies target college students, but the best rates are typically found off campus. "If you need a credit card," says Spivack, "it's smart to do your research — find one with no annual fee, a low APR, and keep your credit line low — $500 or $1,000 at the most." Many students don't realize that they can lower the line of credit offered by credit card companies. You can. You can also reject a credit line increase if and when it's offered. Also when it comes to credit: Emphasize to your kids the importance of paying their bills on time. Once they have a credit card, they have a credit history, and a series of late payments means it'll be tougher for them to buy a car, rent an apartment, or even get a job in future years.

Put a limit on chats: Let's say a student selects a reasonable cell phone plan, then talks and texts until the bill scales the $100 mark. Taking the pre-paid track, offered by carriers like Virgin Mobile, T-Mobile and Cingular Wireless, is a safer option. "Pre-paid cell phones, in the same way as debit cards versus credit cards, allow you to block off an amount of time and not go over. They allow you to stick to a budget; otherwise, you end up going over your allotted minutes and being charged a ridiculous amount," says Spivack. The catch: Many companies require a small deposit every 90 days — but students will likely need it anyway.

Buy used books: With an average of $900 spent on textbooks each semester, it's smart to weigh the options. Buying used is an obvious choice, and Internet sites like Half.com and Bookfinder.com have made it easier than ever to avoid the campus bookstore completely. But there are ways to save even more. At many schools, individual dorms organize book swaps, where calculus books are traded for history texts until (almost) everyone is happy. Be sure to either trade up or sell back unwanted textbooks at the end of each semester — new editions come out nearly every year.

Jean Chatzky is an editor-at-large at Money magazine and serves as AOL's official Money Coach. She is the personal finance editor for NBC's "Today Show" and is also a columnist for Life magazine. She is the author of four books, including "Pay It Down! From Debt to Wealth on $10 a Day" (Portfolio, 2004). To find out more, visit her Web site, .

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