Budgeting 101: Budgeting for the First Year of College

College life is filled with unexpected expenses, from unanticipated class fees to emergency midnight snacks. It's no wonder students are often surprised at how much they've spent by October.

October is a good time to assess how well your family's college budget is holding up. Now that your college student is settling into college life, you'll have a more realistic picture of how much that college degree is going to cost. You may want to revise your budget, or you may need to remind your college student of some basic financial realities to help them stick to their budget.

Start the Conversation
When you talk about money and budgeting with your college student, it's important to keep their personality in mind.

Just as kids have different communication styles, personalities and interests, they have different money management styles. Think about how they have managed their money to date and anticipate how they will manage while at college or university. Remember to add in their newfound feeling of independence and freedom as well as their access to many spending opportunities. Don't expect your first and third child to spend on the same schedule either!

Budgeting Basics
If you and your college student didn't start the year with a budget in place, you may want to think about putting one together now.

"You would never start out on a road trip without a map. In a similar way, you shouldn't head off to college without a budget," says Kelly Tanabe. Tanabe is the author of 1,001 Ways to Pay for College and founder of SuperCollege.com.

Creating a Responsible Budget
"It's probably pretty easy to estimate how much money you have to spend," says Tanabe. "It's more of a challenge to plan how to spend it. Necessities include housing, food, books and class materials, clothes, personal items and transportation.

"You also need to plan for discretionary spending on things like eating out and entertainment."

Beth Norcross is the author of Use Your Fingers, Use Your Toes: Step-by-Step Solutions to Everyday Math Problems. She says it's important that students plan their budget in a few broad categories.

These areas may include school expenses, housing, food, entertainment, clothes, car or other transportation, toiletries and other personal care, gifts and miscellaneous. By organizing with main categories, students may be less likely to get lost in the details.

"Just remember, there are trade-offs," says Norcross. "If you spend a little more than you planned on entertainment this month, you have to spend a little less somewhere else."

Tracking Money
There are many ways to track income and expenses within a budget. It's up to the individual to determine what works best for them.

"At the basic level, you can use the envelope system, where you designate an envelope for each major expense category like housing, food or books and class materials," Tanabe says.

"Each month you put in the amount you have designated for each category. This helps you monitor how much you've spent for the month, and how much you have left."

By opening a checking and savings account, students also can keep track of how much they have to spend and how much they spent each month. While it takes more time, using computer software can help students keep a budget.

"The beauty of using software is that you get an accurate picture of your finances, and you can see how your expenses change each month," Tanabe says. "The challenge is that you have to remember to input the information."

Norcross says she highly recommends that college students give themselves an allowance each week. With a set allowance, students know what they have to spend weekly -- period.

"Then the trade-offs become apparent," says Norcross. She notes, for example, that a student can stop at Starbucks each day for coffee or go out to dinner with friends on Friday night. They may not be able to do both within their budget.

Recognizing Budget Hazards
One of the most important things students with a budget need to consider is that they do have control over their discretionary funds. It can take students a while to realize that the often split-second decisions they make when it comes to money can have repercussions down the road. Credit cards are a common cause of budget downfall. Students tend to equate credit cards with free money. There are advantages to having one, however, including the chance to learn some financial responsibility and access to better emergency preparedness.

If your child is interested in a credit card you should let them know the interest rate on overdue charges and make sure they know how to calculate the interest charged if a monthly payment is missed.

If you feel your child is able to manage their own credit card, consider helping them get one that's secured by a bank deposit. The card is secured by an initial credit in a savings account with the credit limit going as high as the account balance. Or consider providing them with a credit card from your own account. Studies show that students are less likely to binge-spend on their parents' account.

Kids should know how to write checks, save their ATM receipts and balance their accounts. If you help them learn this valuable lifelong skill before they leave home, they will be less likely to get into trouble with cash or credit when they are at college. They'll have an easier time staying within their budget, and a greater sense of accomplishment as their financial independence grows.