While talking about money is difficult, creating a budget with your son or daughter is key to keeping spending in check. "Figuring out what's the right amount can be tricky, so start with your school's financial aid office. They should be able to give you some guidance," says AuWerter.
Once you have a basic budget, tweak it as necessary to fit your individual needs. If your son or daughter takes medication on a regular basis, budget some extra money for refills at the pharmacy. If they're a big movie buff, include money for trips to the theater and movie rentals. Tailor the budget to fit your child. "To make sure it's realistic, have your child keep a money journal for the first month or two while at school," says AuWerter. If they call asking for more cash, though, don't give in unless it's an emergency. "Remember that because of the school meal plan, your child is not going to starve," says AuWerter.
If they're still begging for money, you can also encourage your child to get a part-time job. Working through school can boost your child's work ethic and their resume. Whether it's babysitting, an internship or working at a local store, jobs lead to references when it comes to looking for a full-time job after graduation. If you're interested in helping your child save for their future, you can also advise them to invest a small portion of their income in a Roth IRA. "It's a great way to get introduced to the world of investing and... in 40 years, it could be worth very big bucks," says AuWerter.
During your budget discussion, it's also important to talk to your kids about credit cards. "Thanks to a new law, starting in February, it's going to be a lot harder for college kids to get credit cards," says AuWerter. "If they're under age 21, they're going to have to show that they have income to pay off their debts, or they're going to have to have a co-signer." While limited access to credit cards will discourage out-of-control spending, parents should think twice before co-signing on a card for their child. "If they're late on the bills, your credit score will suffer. If they don't pay the bills at all, those creditors are coming after you," says AuWerter. The bottom line is, protect yourself and give your child a debit card or secured credit card instead.
While your child is at school, you may be able to save some money on your auto insurance. If your son or daughter isn't taking their car to campus, you may be eligable for a significant discount if your home is 100+ miles away from the campus. Also, check into your homeowner's policy to see if your child's belongings that they keep in their dorm room will be covered. If your son or daughter is living off campus, look into getting a renter's insurance policy to cover their belongings as well.
If paying tuition bills are your concern, resist the urge to dip into your retirement savings. "So many parents want to cover all the costs of college, but many parents cannot afford that," says AuWerter. "There are loans for college at very competitive rates, but there are no loans for retirement. Tap college loans before you hit your retirement account."
For more information on paying for college and keeping your child on a budget, click here to visit www.SmartMoney.com.
By Erin Petrun