Helping Young Adults Budget Money
FOR IMMEDIATE RELEASE
August 4, 2008
We teach our children to say "please and thank you," we encourage them to eat their vegetables, but do we take time to teach them how to manage money? One of the basic money management skills that young adults need is the ability to wisely spend their money. Before young adults leave home this fall to start college, new jobs, and move to new places, talk to them about budgeting.
Take time to sit down with your young adult and make a list of all anticipated expenses. If your student will be at college, check with the school's financial aid office for an estimate of college costs. Typical budget items include tuition and fees, housing, meals, books and supplies, and other expenses.
Once you have a list of expenses, talk about who will pay what. This is a good time for young people to understand all the expenses related to independent living including car and health insurance, car maintenance, clothing, food, etc. While you may still be paying some of these expenses while your student is in college or just starting out, young adults need to be aware that these are expenses they will be paying in the not too distant future.
Now, is the time to be clear about your expectations as well as to listen to your young adult's ideas.
People have an easier time managing their spending when it is clear how much money is available to spend and what expenses are anticipated during a short-time period, such as a month. A monthly plan lets people check if their plan is working before too many problems can occur.
The next step is to build a monthly spending plan. What different income sources will there be? Possible income sources include wages, savings, help from relatives, student loans or scholarships, as well as other sources. Then, compare your list of expenses to the monthly income. If the expenses add up to more than the income, you will need to make some changes in your plans.
Of course, to know if the spending plan is working, people need to keep track of where their money goes. This is a great habit to develop and especially useful during times of transition! Encourage your young adult to jot down their spending once a day or as they spend money. An easy-to-use form is available at the University of Illinois Extension's Consumer and Family Economics website at http://www.ace.uiuc.edu/cfe/money/expenses.pdf.
It may be that after a month or two the spending plan will need to be adjusted. Perhaps, you forgot an expense category or some costs are more than you anticipated. When expenses are higher than anticipated in one category, then either spending in another area must be decreased or more money (income) must be found and budgeted.
In summary, to help your young adult manage their money effectively as they move out of your home, take time to:
1) list all anticipated costs,
2) decide together who will be responsible for paying which costs,
3) develop a monthly spending plan, and
4) check how the spending plan is working and make revisions as needed.
University of Illinois Extension has several resources to help people manage finances. Parent Smarts is designed to help parents talk to their students about financial management. Several fact sheets provide tips and activities about budgeting and credit card management, and are available on the Internet at http://www.ace.uiuc.edu/cfe/credit/parentsmarts/index.html.
Another helpful website is More for Your Money – Using Money Wisely at http://web.extension.uiuc.edu/money/. This comprehensive, interactive website guides users through the process of setting up a spending plan, managing credit, and saving money.
Learning about finances is a lifelong process. While we can't expect young adults to be experienced money managers and not make mistakes, we can help them start out right with a little planning. Now is a good opportunity to talk to your young adult about finances. If you need help, don't hesitate to contact University of Illinois Extension.