Managing campus living expenses can be harder than any college class. A financial advisor helps a Michigan student plan for her first year away from home.

(Article by Traci E. Carpenter from Newsweek, 17 August 2005)

In this, the first of a new series on personal finance, we meet a young woman about to begin her freshman year at a small college in Maryland. Like many new students, 17-year-old Anna Dirkse is nervous about how she'll handle the day-to-day spending decisions that she'll have to make once she starts living on her own. Should she set up a local bank account?  Is it time to get a credit card? How much should she set aside for textbooks? We asked Ben Tobias of Tobias Financial Advisors in Ft. Lauderdale, Fla. to work through these questions with Anna and her family, and to give Anna the tips she'll need to make her summer savings last.

Anna Dirkse is a typical college freshman. She's anxious to meet her new roommate, sad to leave her boyfriend back home in Jenison, Mich. and a little concerned about the 700-mile move to St. John's College, a private liberal arts college in Annapolis, Md. Then there's the question of money.

Annual tuition costs at St. John's run at a costly $40,000 a year. Her parents, Cyndee and Dan, will help to cover that by adding their savings to the grants, loans and scholarships that Anna has received. But the Dirkses are worried about how their daughter—a valedictorian of her senior class when she graduated last May—will cope with being responsible for her living expenses for the first time. “I don't think she has a concept, especially at 17, of the day-to-day spending of money and what it really takes,” Cyndee says. “I think she's in for a rude awakening.”

Anna won't be the only one. Two million students will begin their college careers this fall, and for many of them, college is the first chance they'll have to manage their own budgets. Some, like Anna, will be arriving in August with a lump sum of summer savings that will have to last them all year.  “Knowing how to spread it out” will be their biggest financial challenge, says Ben Tobias of Tobias Financial Advisors in Ft. Lauderdale, Fla., who has helped families plan for college for 25 years.  (Ben and his wife Barbara speak from personal experience too: they are parents of a recent college grad, and a current out-of-state college student.) Anna is already worried about budgeting and says her biggest concern is “making sure my spending doesn't get out of control.”

Ben Tobias says the first step parents can take to ensure their student won't run out of money by Christmas is to plan ahead. Families should discuss their financial situation before opening week and decide how much parents are able and willing to provide for monthly expenses (if anything). Tobias says that there's a wide range of “normal” when it comes to allowances. Some parents give kids as a little as $75 per month for expenses while others give as much as $250 per week. But one trend he's noticed is that “the more generous the parents are with that allowance, the more the student begs for more money.” To help combat frivolous spending, parents should set a realistic budget that their child is aware of, and stick with it, to help students learn to manage their bills, advises Tobias.

Anna has never received a steady allowance, and her time in college will be no different. With an older daughter in college and their son a junior in high school, the Dirkses don't have much to spare, which means, that besides cell phone bills (they share a family plan), and the occasional flight home, daily expenses will fall to Anna. Since she won't be getting a job her first year, Anna has about $1,000 from her summer babysitting savings that will have to hold her until May. 

Some of the biggest college expenses start weeks before school does. Last year, according to a study done by National Retail Federation, the average incoming freshman spent $1,200 on back-to-school merchandise and dorm shopping. Anna's mom is hoping $200 will be enough to cover dorm costs, but Anna has already spent half that on orange and turquoise accessories from Target, and she still needs more—a hot pot for coffee for example.

Tobias stresses that when packing for college, less is more. Students should coordinate bigger items with their roommates and be familiar with the specific policies of their college, such as what size sheets to buy (twin or extra long?) and what appliances are allowed (some colleges, like Anna's, prohibit microwaves or toaster ovens).  If parents are accompanying their son or daughter to move in, Ben says buying bigger supplies locally can reduce hassle and duplication. If driving to school isn't possible, shipping items by ground can be a cheaper option. Ben Tobias' wife Barbara, also recommends making lists—everything from toiletries to appliances—to prevent costly last-minute impulse buys.

While Anna will have her parents' help for move-in (they will pack up their car on August 23, for the 13-hour drive south), mom and dad won't be picking her up for weekend visits and holidays. Anna's first flight home is planned for a long weekend in October, and the seat has already been booked with extra frequent flier miles. But holiday flights are trickier to plan and blackout dates may prevent families from cashing in earned miles. Ben and Barbara Tobias suggest booking tickets as early as possible, and Cyndee says she's going to look into flights heading into and out of major airports within a few hours' drive, rather than spending the extra cash to fly Anna into an airport nearby.

While students can go without hot pots and visiting home every other weekend, books are a necessary, and huge, expense. Anna's already started collecting her required reading from local bookstores using gift certificates she received from graduation. While St. John's Web site recommends Anna reserve $275 per semester for books, Ben says this is a low estimate, even for a liberal arts curriculum. And some science and business majors, could “easily have a 1,000 dollars going to text books their first semester,” he says. To combat sticker shock (the average new text book is priced at $102.44, according to a study done by the California Student Public Interest Research Group), he recommends that students should shop around both at stores and online, borrow from libraries and buy used materials whenever available. But ultimately, students should be prepared to empty their pockets to fill up their bookshelves.

Bare shelves shouldn't be a problem for Anna. When she isn't reading books, she's buying them, and antique books from second-hand shops and garage sales are her biggest spending weakness, says Cyndee. (“They're two bucks!” Anna justifies). But the sorest point of contention in the Dirkse household is not what Anna will purchase, but how. Anna insists she's ready for a credit card of her own, but her mother isn't convinced. “We've had some major discussions this week,” she says. And with good reason: while three-fourths of undergraduates have a card in their name, according to Nellie Mae, a student loan corporation, they carry an outstanding balance averaging $2,169.

Even so, Tobias recommends that freshmen start handling their own plastic early, and charge everything they can, to build a credit rating and the budgeting skills they'll need when they hit the real world. Go with a name brand, he says, most of which offer student cards with no annual fee, and some even offer points to put toward future purchases. And the lower credit limit, the better. Credit statements should be sent to parents for monitoring (and for a permanent address), but never for payment. 

Whether or not Anna goes to school with plastic in her back pocket, she'll need a place nearby to keep her savings. Ben advocates setting up a checking account attached to the parents' account for quick transfers between funds, but for many students like Anna who go away to school (a majority of students attend a college more than 100 miles from home), Ben suggests finding a new bank close within walking distance of the dorm. ATM fees can add up, but most schools have arrangements with a local bank to offer ATM services at no charge on campus. And all expenditures can be tracked online, so students have no excuse not to know exactly how much they're spending.

Many kids entering colleges have never been taught how to keep a spending ledger or, in some extreme cases, even how to write a check. Parents shouldn't assume their child has all of the necessary skills for online or paper banking. Tobias recommend that new college students get some coaching on how to maintain a checkbook and keep receipts (essential for book returns) before they leave for school and that once they are there, parents should review the first banking statements.

But even the best-laid financial plans can fall apart when put into action. So what should parents do when they get that almost inevitable call from their broke child asking for a bit more spending dough? “Saying no is one of the best things you can do,” Tobias says. This is easier said than done, especially if the parents have the money to give, but Tobias stresses learning how to live within their means is an important part of student education. Then again, sometimes what's been budgeted for back home won't realistically cover things on campus, and parents should be willing to reassess the situation after a couple of months. If the finances are dire, students can always check with their school's financial aid office for advice on grants, loans and part-time jobs available to them.

Anna hopes it won't come to that, and Cyndee isn't sure what she'll do if Anna calls home in need of more cash. “Depends on if she has a credit card,” she laughs.  But Cyndee says she thinks that despite her daughter's expensive tastes, Anna will be all right. And in eight months, Anna and the rest of the class of 2009 can put their fears of first-time budgeting behind them and start planning for bigger financial matters—like paying off their student loans.