More than half (51%) of post-secondary students tapped their parents for additional financial support while at school last year because they ran out of money, finds a CIBC poll.
“Some children are treating their parents as their personal ATMs,” says Sarah Widmeyer, managing director and head of wealth advisory services, CIBC. “It is important to teach them the importance of balancing a budget in their early teens because it’s a much a tougher lesson to learn when they are off living on their own for the first time.”
The poll results show that overrunning a budget is common with students from all financial backgrounds. Students from families with a household income of less than $75,000 demonstrated a similar lack of budgeting skills (52% asked for money) as those from families with an above-average household income of more than $125,000 (48% asked for money).
Parents should tell their children there may be unforeseen events in life that result in financial challenges, adds Widmeyer. They should also share their expense tracking to demonstrate how they account for spending.
A great way to ensure children grow up to be financially literate is to involve them in the family’s financial matters early on. This could be planning a vacation budget, paying monthly bills, or reviewing a credit card statement together.
Here are four more tips for students.
1. Distinguish between needs and wants. If funds are limited, make sure kids fully cover their necessary expenses first and prioritize non-essential expenses.
2. Draw a budget. Itemize monthly expenses and add total monthly income, including any loans, scholarships or money earned from part-time jobs. This will provide kids with a clear picture of where their money is going.
3. Manage cash flow. Checking expenses against the amounts reserved in a budget and sticking to it will help students avoid overspending and getting into debt.
4. Borrow responsibly. A credit card isn’t free money and kids should charge only what they can afford to pay back. Reduce the credit limit to keep them from spending money they don’t have.