We've been talking about back to school recently and with
August ending many colleges are seeing students return to campus
and for first year students, it can be overwhelming
, throw money and stress on top of that and
it can feel like too much well to help you
with managing your money as a college student. We
have Fitzpatrick, he's the managing director of, of
Wealth Planning at Robert Stevens. So ma and thank
you so much for coming to the show for students
who are managing their own money for the first time
. How do you think they should go about setting
a budget? Well, let, let's take a
step back. What we're trying to achieve here is
we're trying to, we're trying to graduate, right
? And have a little fun. Um So the
way to think about allocating expenses is uh is in
two categories, there are need spending and uh want
spending your needs are your, your basics, your
housing, your books, your equipment, the things
you need to, to live and, and graduate
college, the wants are the fun things you know
, going out, going out for drinks, which
may or may not happen more in college for a
lot of folks. Um So between those two categories
, uh needs and wants, you want, your
split should be about 50% of your spending on needs
and 30% on wants and then keep 20% on the
side just in case. Um Now once you've,
once you've determined what your weekly budget is going to
be, you times that by a number of weeks
and that's your semester budget. Now, do you
have any budgeting apps that you might recommend that might
be easy to use there, there are a lot
of apps out there. I've used mint dot com
, but there's an app for everybody and they all
do, they all have Pluses and Minuses. I'm
sure our audience is very aware of how to research
an app that's going to work for them. Now
, how should students divide their resources between things they
might need like textbooks and extras, like drinking restaurants
, entertainment. Uh Yeah. Right. So the
, um, uh, the things they need,
um, are, are, first of all going
to be more expensive than, than, uh,
you would think. Right. So, if you've
been at home, um, you've had a lot
of the basics paid for, uh, paid for
you, like, uh paper towels, bread,
milk, whatever. So it's gonna be a lot
more expensive. So, um, of the money
you have to spend 50% of that should go to
, to needs. Um, and 30% to wants
as I said before, um, and, uh
, you know, depending on how you're funding college
. If, if your, um, if your
family is giving you allowance, you have a framework
to have discussions with them as far as, um
, this is how much I need to have for
this semester and that, that could get you that
amount and, and they, I think they would
appreciate how, how mature you are by developing a
plan. Now, if you're depending on savings and
you come up with your spending plan and you may
find yourself a little bit short. Um There's a
few levers you could pull one is you could try
to spend less on those want things. So maybe
instead of going out, um, you know,
four nights a week, you go out three nights
a week. Um, the other thing you can
do is potentially work, right. So a lot
of colleges have uh flexible work study programs. Um
, I, I had done that myself. Um
, or, you know, ideally you could get
a paid internship and then you're getting experience plus money
. That, that would be ideal. Yeah,
I want to ask you that about that. Is
that a good idea? I, I didn't have
a part time job but I did a lot of
freelance gig economy kind of work while in college I
did random and ends. Yes, I think that
that's great because that's again a flexible, it's like
working for the college in a flexible job program except
you probably will get paid a little bit more.
Um, and you may be able to do things
that are more fun and more interesting. So,
um, yes, I completely recommended that. But
um, you know, just, just a caution
here that as soon as you make over a certain
amount of believe it's$5000 you will, you will
start to pay taxes. Right. So you,
you have to now put that into your needs spending
budget. Now, if students are getting financial help
from their parents, how should parents give out that
allowance and to help these kids learn how to manage
their finances responsibly? Oh, ok. Well,
that, that's great. So you don't give it
to the kids all at once. You um you
give them their monthly budget, you know, actually
ask them to come up with a spending plan and
um, put that amount of cash in their,
in their uh checking and you know, they,
they, they can reach out to you if they
need, but it would be interesting to see if
they could stick to that budget. And then so
if you have your own money, I suggest keeping
most of it in a savings account and your monthly
spend in a checking account and just, you know
, deplete that checking account for the month and top
it off at the end of the month when you
need to go into next month. Now, how
much should students save for a cushion. Let's say
there's like emergencies that come up. Sure. So
, I think 20 cents on every dollar 20,000.
Good rule of thumb. It's a 20% rule.
20% rule. Now, what are some of those
surprise expenses that a student might not think about?
Uh, sure. So, um, so again
, like the basics are gonna cost more if you've
been, if you've been living at home. Um
, what, what also is, uh, alarming
to many is that, um, uh, those
costs increase each year by, uh, 33 to
5% and whether you're not, um, contributing to
your tuition, uh, those costs are rising 5
to 7% and, and housing can be rising at
that amount too. So, um, these can
be surprising. No stuff like laundry. You probably
never had to pay for laundry in the past.
Yeah, absolutely. Um, it all adds up
now, if a student starts to fall behind part
way through the semester, do you have any recommendations
on how they can get back on track? Sure
. Um, so, um, you know,
reach out to family and, um, if you
can, um, if they, if they want
a guarantee of payment, you can come up with
a plan after school pay this month. Some schools
offer, um, a payment, uh, a
, a small loan, um, that might be
interest free or might be a small amount of interest
that the kind of the next and not ideal thing
is a, a subsidized student loan, which is
the interest rate could be 5%. And then there
are unsubsidized student loans and then plus loans which can
run upwards of 7.5 8% on interest. So that's
kind of the, the hierarchy of what you want
to try to do to get some funds if you
don't have any or run out of it. Now
, you know, students get a lot of credit
card offers. Is it a good idea to sign
up? If you're just trying to make ends meet
, they get a lot of credit card credit card
offers and it depends on the person, right?
So it can't be good if you're financially disciplined and
you have to be honest with yourself here and pay
off your credit card every month. If you're someone
who is terminally short of cash and finds himself needing
to call their parents all the time or rely on
friends, I think that maybe hold off on that
credit card for a little bit until you can maintain
a steady spending plan or that you're earning some income
. Well, thanks so much for joining us here
at Cheddar. That's Fitzpatrick. He's the managing director
and head of Wealth Planning at Robertson Stevens.