Being a middle-school student has always been complicated — from new relationships to solving for “x”.
What often falls through the cracks in the maturation process though is an education about money - particularly, saving, budgeting, and growing it. Both students who plan to attend college and those who don’t, should sit down and begin a series of thoughtful conversations with their parents, guardians, or other responsible adult as soon as possible to learn about the process.
As adept as students are on a computer these days, a program like Microsoft Excel or online tools like this Free Online Budget Planner or of course Mint.com, offer simple ways to calculate income and expenses.
A good exercise for a student is to make a simple spreadsheet of their parents’ monthly budget. It will teach them about how much running a household costs and the value of saving money and eliminating wasteful expenditures. After completing the spreadsheet, the student should suggest ways to allocate funds for college and items that could be trimmed or cut to create extra money.
One of the best ways for parents to save for college is by taking that extra money and establishing a college savings plan, or a 529. It’s a method to save for education in a tax-advantaged way. All the contributions are made in after-tax dollars, but the earnings are tax-deferred. The money is tax-free when used for qualified education expenses. Anyone of any age can open one with any amount of money no matter what their relationship to the beneficiary is. It’s a perfect birthday or Christmas present from aunts and uncles or grandparents. The beneficiary can even be changed or the money can be used for private K-12 schools.
Before a student is old enough to work, a weekly allowance might be considered by parents or other relatives and a local checking account should be opened. To be fair to the student, any school supplies or other monies required for school should be excluded from the allowance. Regardless of the weekly amount, it should be used as a source of savings or spending on entertainment such as video games, music, or movies. Learning how to set the balance between spending and savings is critical. If it can be done in middle school, it can be done in college or as an adult.
The key lesson that must be learned is to stay within your budget. If parents or other relatives bail out students when they overspend, it defeats the purpose of the exercise. It also provides them with the false illusion that a safety net is always there.
When a middle-school student is old enough to work part-time, they should do so in lieu of an allowance. Robert Johnson, senior financial consultant of New Century Investor Services in Cranbury, N.J., says, “Having a job, besides being a student, helps kids to learn about money very early.” Tracking your spending on a weekly and monthly basis is a good habit to get into, experts say.
However, it must be stressed that, just because a student has a job, it doesn’t mean they get to slack off in school. Balancing school, work, and play is a skill that will pay off for the rest of your life.
Learning how to be financially responsible is one of life’s most important lessons. There are plenty of adults who never learn it. But, with the costs of college (and most everything else…) so high today, it’s more crucial than ever that students, even as young as in middle school, try to understand at least the basics of good budgeting to save for college/ their future and reduce the amount of student loans or other debt they have to pay after they graduate.