College is a great time for your child to begin to hone their money management skills. The majority of people operate on an account balance form of budgeting. However, when an emergency hits, like a car repair, and the account balance is too low to cover the repair, you will have to ‘borrow’ from another source.
Another option is budgeting with virtual envelopes for all expenses including those ‘unforeseen.’
“If you can get your child to start thinking in terms of envelope balances rather than account balances before they go off to school, you have done them a huge service,” says Mr. Smith, who has four children, including one entering college this year. http://online.wsj.com/article/SB10000872396390444318104577587400019575634.html?link=SM_pln_cl_res
Take all of the expenses, tuition, room, board, discretionary spending, etc. and divide by 12. Then take all of their income and allocate it among envelopes.
Finicity’s http://www.mvelopes.com automates the process for your student. Have your child review all their expenses, especially the discretionary spending.
Now when your child goes to spend money and their virtual envelope is low or empty, they will have to make a decision to ‘borrow’ from another envelope or choose not to spend the money.
This will help your student learn money management skills that will benefit them beyond their college years.