Back-to-School Budgeting

By Claudia Mollerup-Madsen

For parents, approaching the start of school may leave you feeling a mixture of emotions as you watch your children grow up and mature. With the passage of time, change is inevitable; this is especially prevalent as children head off to school year after year. You may feel an emotion you didn’t expect: stress.

You may be feeling caught off guard with how fast the summer is passing and how unprepared you and your children may be for the start of school. So, don’t let yourself get caught off guard financially. Use this time to review your budget. If you are like many of the parents who are beginning to think about back-to-school needs, follow these financial tips to ensure you feel anything but stressed when it comes to back-to-school spending: 

Budget for the School Supply List Now

First and foremost, anticipate receiving a school supply list fully loaded with notebooks and binders. In addition to those supplies for school, you will also need to take into account gear and equipment purchases for extracurricular activities. The cost of supplies can add up, so do not wait to change your summer spending habits. Get ahead now and begin cutting back on spending to prepare for the back-to-school needs. It is a good idea to be prepared for unexpected expenses as well; be sure you build your budget to account for these potential expenses.

It’s smart to look for ways to cut costs; whether that is being on the lookout for big back-to-school sales, or by cutting back on unnecessary spending such as dining out, entertainment expenses, and daily coffee runs. Review your spending habits and rework your budget to allow for more capital to be put towards school spending.

Shop the Tax-Free Weekend in Texas

One way to save money and stay on budget is to shop the Texas Tax Free Weekend August 10-12.   Items like backpacks, clothing, shoes, and back to school supplies are tax free those days.  Many states offer Sales Tax Holidays for back-to-school gear. For more information on the specific items in Texas, visit the Texas Comptroller’s.

Make Smart Buying Choices

When it’s time to shop for your children’s supplies, clothes and shoes, do not be afraid to say no. Your child may want the newest and coolest brand name items, but you need to prioritize between the clothes and supplies that are essential versus the ones that are just desirable. For example, say your child wants a $80-dollar backpack because the brand is “in” but that purchase will throw off your budget. You need to be ready to say “no.” Use that scenario as a teaching moment about the importance of sticking to your budget.

Consider using back-to-school shopping as a tool to instruct your children about having a budget and living within your means. Older kids may also be able to help you compare costs of items while looking for clothes and supplies which will instill good habits for them in the future. If your child is older, have them use some of their allowance or money from a summer job to purchase some of their school provisions. This will teach them the responsibility that comes from earning money and will teach them to make smart buying choices.

Plan for their Future

Finally, use this time to think about your children’s next school year and years to come. Keep track of the budget you build this year, and use that as a basis for next year; but anticipate different school needs. Furthermore, use this time to plan for your children’s secondary education. As your children are preparing for post-high school training and/or college, have them start thinking about the ways to pay for it. When your children are in elementary and middle schools, have them save some of their own allowance for college as a lesson in how to plan ahead financially. For high school students, have them set aside a percentage from part-time jobs for their post-high school education. As a parent, consider opening a 529 plan. A 529 plan is a higher education savings plan administered by a state or educational institution designed to help families set aside funds for future college costs.

Opening a 529 savings account allows you to deposit money into the accounts and withdraw it tax-free, as long as the funds are used for qualified educational expenses, such as tuition, books, and room and board.  Another advantage of 529 plans is that the account owner retains control of the funds, which can provide added flexibility.  Additionally, you may be able to use some of your 529 plan dollars earlier towards private elementary and secondary school tuition.   But note, it can only be used for tuition and only up to $10,000 per year.

As this summer comes to a close, don’t let stress be an emotion you feel as you prepare to send your children back to school. By practicing smart financial planning and being financially savvy, you can feel prepared for the start the new school year and school years to come.

Claudia Mollerup-Madsen is a Financial Advisor with the Wealth Management Division of Morgan Stanley in Houston.

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