Alison Griffiths

How long will it be until you get the SOS call\text\post\tweet? If you have a college or university student, especially in first or second year, I'm betting the "send money fast" message will arrive sometime just before pumpkin carving begins. Those with post-secondary students living at home might make it to the Grey Cup before the plea arrives, but it is almost certainly going to come.

Going from high school and home to college is a huge financial step for young people and one most are ill prepared to handle. The result can be stress for both students and parents, not to mention hardship if a bailout is required and family funds are already stretched.

The first line of defence is to set up two bank accounts, one to receive lump sum deposits from student loans, grants or other awards. The other should be for monthly spending with an automatic deposit based on how much is budgeted for regular expenses.

Of course, to make it work the student needs to have a budget. With a couple of weeks left in the summer, this is a great time to put it together. Actually, students will need two budgets, one to cover up-front expenses such as books, lab equipment, club memberships, damage deposits, athletic fees and so on. The other will be a spending plan for regular monthly expenses from food and rent to transportation and entertainment.

There are some very good student budgets available. One interactive tool is provided by the Financial Consumer Agency of Canada. Most banks and credit unions also offer something similar. However, most of them fall down, in terms of utility for students, by lumping one-time costs in with monthly expenses.

Tailor these ready-made budgets by detailing items like tuition and books separately and making a one-time transfer from the holding account to the spending account early in the semester when the money is needed. Then list all other expenses and average them for the school year to give the student a good idea of how much they need to transfer monthly to cover these regular expenses. The process of physically listing these items will educate students about what they will be spending on essentials and how much they can afford in other areas.

While students and parents alike complain about rising costs for tuition and books, a big chunk of money is actually spent elsewhere. A fascinating 2009 report by O'Donnell & Associates (a U.S. marketing and research firm) indicated that fully 40 per cent of a student's budget goes toward discretionary expenses including entertainment, clothing, personal grooming, cellphone and travel.

In contrast, only four per cent of school year expenditures goes to books and supplies and 26 per cent to room and board (board includes basic meals or a meal plan but not takeout, restaurants and late night snacking).

These figures are based on American students but hold true for those attending public colleges where tuition is comparable to that of Canadian universities (as opposed to private schools where the average tuition tops $25,000).

The lesson here is that most student over-spending occurs in areas that can be controlled or cut. It is tough for students and their parents to predict what to budget for things like entertainment. But it's important to set a target and have the student track what is spent.

Tracking is critical. Fortunately, aside from the oh-so 20th century pen and paper, there are many tracking apps available. For security reasons I prefer those that are not linked to a bank account but require you to manually punch in a starting balance and then enter expenses as you go. Do a bit of research first as some like Money Plus and Pennies for the iPhone and iPad get so-so reviews while Cashish is highly rated. Android users might try Expense Tracker. For Windows Phone 7, Quick Budget (formerly Just Money) has full budgeting and tracking expense features.

Going to university for the first time, especially away from home, can be overwhelming. Though colleges and universities have improved their financial resources and assistance, particularly about topics such as budgeting and credit cards, many students either don't know about what is offered, are hesitant to ask for help or don't realize when they are getting into financial trouble.

While parents may be leery of offering too much advice to their newly independent children, research suggests that the majority of high school students and those entering university are very receptive to financial guidance from their parents. Students who are well prepared will be much more likely to make it through the first semester without tapping Mom and Dad for a cash top-up.

Alison Griffiths' latest book isCount on Yourself: Take Charge of Your Money. You can reach her at www.alisongriffiths.ca, and on Twitter at @alisononmoney.