Financial Health Starts Early

Whether students are in grade school, high school or college, the real world will soon be just around the corner.

That means doing “grown-up” things like managing finances, which may not be the most exciting thing in the world, but is important.

Students of all ages can get a head start if they learn to budget their own expenses, one step toward building their own financial wellness.

Jonathan Morales, division director of community banking and business development with Chase, has a five-step approach. The first step is to calculate all income sources.

“The most important rule of budgeting is to never spend more than you earn,” he says. “While that may sound basic, the truth is that many young people experience financial setbacks because they've never been taught how to budget.”

The second step is to list all expenses — including mandatory expenses like textbooks and discretionary costs like tickets to football games — in a monthly budget sheet, says Morales. Regularly monitoring bank balances online is also recommended.

Parents should then decide which bills their students will cover and establish a firm cap on entertainment expenses. 

“Entertainment is the biggest budget-buster for high school and college students,” Morales said. “There's a lot of pressure and temptation to spend money on social activities, but it's important to help establish a strict limit on entertainment costs. And once their money allotted for ‘fun’ activities is gone, they can't spend any more on that budget category for the month.”

The fourth step is to use easy ways to save on common costs, such as college students carpooling and using public transportation. Morales says high school students should make their lunches to avoid buying one at school every day. Purchasing used textbooks or checking out books free from the library can also cut down costs.

The final step is to create a habit of saving.

“Saving and establishing an emergency fund is also a key step and can provide peace of mind to help with life’s unexpected surprises,” Morales says. “Understanding the need for an emergency fund and how to build one can help your student at any stage of your life. Don’t be afraid to start small — it’s the idea of starting that is what’s most important.”

James Lewis, president of the National Society of High School Scholars, says there are some overlooked expenses to watch out for, such as health insurance, personal care items, school supplies and other items that may seem small, but add up quickly.

He also says other expenses such as medical emergencies, car repairs, technology expenses, membership fees and field trip expenses need to be considered.

“By being aware of these less common and unexpected expenses, students can better prepare themselves financially and ensure their budgets are effective and fit their needs,” Lewis says.

Lewis also recommends having a backup or emergency fund.

"The recommended amount for an emergency fund is typically three to six months' worth of living expenses,” Lewis says. “If students are able, they should aim for at least three months' worth of living expenses. This fund acts as a safety net in case of unexpected events or emergencies like medical bills, unexpected travel, or temporary loss of income. It's always better to be prepared for those unexpected surprises.”

For college students, there are many expenses to consider — basic and non-basic. Morales lists items such as tuition and fees, housing and utilities, food and groceries, transportation costs, entertainment and social activities, personal expenses, health insurance and medical expenses, recreation and fitness, and debt repayment.

“It's important to assess your individual circumstances and priorities to create a budget that reflects your needs,” he says. “By being mindful of these expenses, you can manage your finances while navigating your college journey.

“By considering these various expenses, you can create a comprehensive budget that aligns with your financial situation and priorities as a college student. Adjust the allocations based on your personal needs and seek ways to save money whenever possible.”