A common question many parents have as their children head off to college is whether or not to give them money each month. Parents want to make sure their children are taken care of and, since they aren't technically in the real world yet, want to be there to support them too.
The flip side, of course, is that some parents are concerned that they won't be able to control how their child spends the money. Others fear their child will never learn how to manage money on their own.
What's Your Situation?
Whether or not you decide to give your college student money depends heavily on your particular situation. Is your child emotionally mature enough to manage the money you give them? Are you in a financial position where you can give them money without hindering your own finances? Has your child shown that they can handle money in the past?
You can use the allowance as a learning opportunity.
One major pro to giving your college student money is that it's a prime opportunity to teach them about finances. For example, parents can sit down with their children and teach them how to budget a monthly stipend. They can also use it as an opportunity to teach their kids about banking fees, how credit cards work and how to save. Many of these things are not generally taught in school, so it can fall on the parents to educate their children.
Your child has something to fall back on.
"The main pro is that you know your child has funds to cover his or her needs and wants," says Erin Lowry, millennial money expert and founder of BrokeMillennial.com. Let's be honest, it is unlikely that a college freshman who is leaving home for the first time has a job already lined up when they get to school. That's why, at least in the beginning, it could make sense to give your child some money each month.
Your child could spend your money irresponsibly.
The main concern parents have when giving their college student money is the risk that they will spend it irresponsibly. This is where boundaries and limits come into play.
"Parents can set different parameters for how they want their children to receive money during college and how much funding the parent is willing to give," says Lowry.
This is far different than just handing your children some cash and hoping they don't spend it all.
"A parent could offer up $1,000 at the beginning of each semester for a child to use to cover lifestyle expenses," she adds, "but when it's gone, it's gone."
If the child spends the money and comes back asking for more, Lowry suggests parents set a limits and not give additional cash until they learn to properly budget.
Parents also have options to protect themselves and their child, she continued. For example, parents can opt for getting their child a pre-paid debit card or an account with no overdraft fees. By using this approach, the child has training wheels, and no one's getting hit with fees for overspending.
You could hold your child back.
"Supporting the child's discretionary fund during college could make it more difficult to allow the child to stand on [their] own two-feet after graduation," says Lowry, who notes that this is a major concern among the parents she speaks to.
By making these allowances, you run the risk of teaching your child to rely on Mom and Dad instead of figuring things out independently. Lowry has seen recent graduates living at home rent free or parents covering the cost of insurance, car expenses and groceries long after college.
It may also mean that the child won't find a job while in college. Some parents don't want their children to work while going to school and give them money so they can focus on their studies. At times this even includes summer jobs if the child is taking summer classes. But a work-free academic life could make finding a job after graduation trickier. Research from the University of Miami published in USA Today shows that employers consider work experience as the most important factor when hiring college grads.
Whether or not you decide to give your child money while they are in college is a personal decision. However, if you do decide to give your child money, make sure that you put boundaries and limits in place. This will help minimize the risk of blowing the budget and could actually teach your child about proper money management.