Stretching Your Dollar: How College Students Should Manage Personal Finances 

<div class="block">Money management and personal finances are still not part of national education curriculums leaving the path to mounting debt clear for incoming college students. Mallon FitzPatrick, managing director and head of wealth planning at Robertson Stephens, joined &#39;Stretching Your Dollar&#39; with tips for students to successfully manage their money while in college.</div>

Stretching Your Dollar

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 Malan 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. Uh 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, um, 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 uh 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. A 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 your family and, um, uh, if you can, um, if they, if they want a guarantee of payment, you can come up with a plan after school. I pay this month. 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 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 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.