My son is finishing his first year at a small college that has been great for him. He has been hired by a faculty member to assist in research for the summer. He will earn around $4000.
Any perspectives on how we should work with his earnings and expenses? Maybe he should contribute half of what he makes to tuition for next year, and live off the rest for the summer? I wouldn’t mind if he could bank some of it, but it seems like student’s assets are expected to go toward college in the FA picture, so maybe that’s not even an option.
Living expenses in his college town are really cheap, and he tends to be frugal.
Any thoughts or helpful insights much appreciated! This wasn’t on my radar six months ago; I imagined him coming home and spending most of the summer looking for any kind of job at all.
my kids earned about that amount with similar jobs through college. They usually spent about a third of it on living and banked the rest. If you don’t need it for tuition the next year, I’d be inclined to let them keep it. My kids are frugal too, and my graduating senior did just open a Roth IRA and put some of her “saved earnings” in it! That is a fabulous idea.
Colleges expect students contribute usually at least $3000 each year. So, it will not affect FA if he put his money in his bank account. He will need to report the earning on next year FA application. Besides the college already knows how much he get paid.
I’d say $2000 toward tuition or not taking loans, $1000 to live off over the summer, and $1000 for his spending money for the year. Is he staying on campus and is his housing subsidized?
My son and daughter worked during the summer and they put earnings in their bank and their FA packages were not affected. They used that money to pay for college costs. My son made a lot more than $4000 during the summers. By the end of the year their bank accounts were empty.
If students put money in the bank without spending then it affects FA.
In general, earned income affetcs FA regardless money where the money is kept and spent. But if the money is in the range of expected student contribion then it does not affect. Students have to report income on FAFSA and CSS profile.
We paid for college. Our kids paid for all discretionary expenses…and books. Who is paying his living expenses this summer at the college? Maybe that is where his summer earnings could partially go!
We paid for college, as well, and had a plan that didn’t include our daughter contributing as long as she kept up her grades and didn’t lose her scholarship. She did, so she didn’t contribute to actual expenses. The way it worked for her (and I am so grateful) was that she had a job in her actual major all four years (benefit of having a resume at the ready on day 1) which paid for her books and personal expenses with enough left over for summer housing the two summers she couldn’t live at home. She then put all of her summer earnings into a CD that she added to each year. Having lived frugally in undergrad, she made prudent choices for living in grad school and will be able to add about half of her stipend each year to her savings. She expects to graduate with about $20,000 in savings and having purchased and maintained a reliable used car.
If you can encourage your son to save some of the money toward the post-college future, I think that is a great thing for kids to think about and prepare for.
I’ll be very happy if kid #2 saves some money whether it’s Roth or not. She is already planning to spend some on something. I suggest some ridiculous amount as a saving goal knowing she would not meet it, but even if she can save halfway of the goal, it’s still good.
Our DS just started his first co-op rotation. We are having him pay for his food,spending money and gas for the truck. DH has asked him to save at least 30% of his pay for use after he graduates because we have 2 other kids to put through school. I would not have him put it in a Roth IRA. When kids graduate they need to put down a deposit on apartment, usually buy some sort of car and they need some sort of emergency fund… If the money is in a Roth then he won’t be able to get to it easily…
@Madison55 Probably you should read my whole paragraph in post #3.
I never thought a student can set money aside in a saving account or in an investment account for future retirement and then apply for FA to cover the present college cost.