Excitement is in the air for many of you as you head abroad for college.
It is all too palpable as you prepare to leave home for the first time in about a month — for some even less — packing and planning to make the transition to the new life as smooth as possible.
But once in your dorm sharing space with new roommates, you will be away from parents — on your own, taking charge of your life and actions as you work towards fulfilling your career ambition.
While in college, you will be managing your finances even if your parents are supporting you. The good thing about this new found independence, hopefully, is you will learn money management skills, which will stand you in good stead for the rest of your life. And this involves taking responsibility for sticking to a budget, and taking care to save in ways that do not distract you from your studies and put pressure on your parents, financially or otherwise.
The first thing the young men and women should do is budget their expenses. While parents might be wiring tuition and dorm charges straight to the college, you need to take care of other expenses such as books, stationery, necessary gadgets, toiletries, entertainment (eating out, movies, games) and travel. You need to have a budget and adhere to it. Temptations abound and, for some, peer pressure can throw you off and so it is all the more necessary to budget your spending.
“Whether you are blessed with financial support from parents, or making your own way in the world, everyone should learn the art of budgeting,” said Andrew Prince, senior consultant at Acuma Independent Financial Advice. “This could be budgeting the weekly finances to that of your time.”
For some it could be a monthly one.
Tracking one’s spending is the next important step to make sure it is within the limit, that is within the funds allocated to you.
In this regard, parents have a role to play. Maya A., a Dubai-based parent who is sending her twin children to Canada and the United States for undergraduate studies in business and finance, and engineering respectively, thinks that a good way to keep a tab on their spending habit is to give them a reasonable budget based on the living expenses and expecting them to stick to it.
“The budget can always be fine-tuned based on their requirements,” she says. “We trust our kids to turn to us in case there is a problem.”
Maya’s daughter Meghna is not worried about wrong spending habits but says she needs to take care of her belongings.
“I am often quite absent minded about where I leave my things and need to make sure I don’t lose my money,” she says.
While Maya and her husband did not have any real discussion with their children because they believe their children know that they have to be careful with their money, experts see the need to give some advice on money management.
Some children may need some practical advice on how to operate bank accounts, maintain an excel sheet for budgeting exercise, and the need to save without cutting down on the basics. It’s equally important to monitor the ATM usage.
Steve Gregory, partner at financial advisory firm Holborn Assets in Dubai, says it is important that the wrong lessons are not being learned with cash from the parents.
“It’s a sensitive issue perhaps, but one where the parents will be wise if they sit down with their young person and debate gently what is expected and what is permitted,” he said.
Credit cards while in college are something to avoid, all experts agree.
Usage of credit cards requires discipline and at a young age many do not have that. Banks and credit unions come on campus and lure students, often with freebies like T-shirts and pizzas, to sign on credit cards. They put a case that it’s good to start building your credit history early. Well, you will have enough time after college — after you land a job — to build that history. College is the time to concentrate on your studies.
You should know that interest rates are extremely high and unchecked use of credit card might lead to debt and you or parents struggling to pay it off.
Sometimes, it is necessary to take a student loan and sometimes it is even desirable, says Prince of Acuma.
“While I am not advocating getting into debt, UK student loans only become repayable once earnings exceed £21,000 and it may assist with cashflow,” he says. “Pre-paid credit cards could also be used to assist with budgeting and access to emergency cash.”
Learning to be smart spenders
To save from budget, the you have to be smart spenders. There will be opportunities in college to do so.
Prince advises students to join the Student Union [mainly in the context of UK], which will allow them to avail discounts at various outlets.
“It also gives you the opportunity of sharing money saving hints and tips with fellow students,” he says.
“Get involved in the Student Union and learn the solutions the students have found, though that won’t happen in the first days of university,” he says. “Young people have little embarrassment about money and are happy to show and tell the solutions they found; this might save mum and dad a small fortune.”
Also, when it comes to staying in touch with your close ones, there are cheaper ways.
“Use things like Facebook and Skype to keep in touch with friends and family back home, rather than running up a massive international phone bill,” Prince says.
For text books, experts advise to buy used ones, or in case of laptops, to opt for relatively cheaper brands than an expensive Apple Macbook unless your course, such as one on design or graphics or film, demands it.
Working legally on campus on the side, without affecting your studies, is not just a good way to earn but also, it’s a start to your work life. A work experience in college puts you ahead of others in the job market.
“Work shows future employers the skills you have rather than the education,” Gregory says. “So don’t underestimate the opportunity to work.”
The money earned can be spent on hobbies and entertainment and for creating an emergency fund.
Meghna, who is headed to York University in Canada, and her brother Mehul, who is joining Rutgers’ engineering programme, are keen to work part time on campus.
“Yes, I will be working on campus in order to support my personal expenditure while there,” Mehul says.