Sending a Child to College

Have a child headed off to college this fall? Don’t let the excitement and trepidation overshadow a smart financial start for you and your freshman.  Sure, you’ve done the paperwork, filled out the applications and saved for tuition. But now that your child is ready to go, take time to review your insurance and banking packages to make sure your family really is adequately prepared. Here are a few areas to consider.

Insurance
Will your child be taking a car to school?  Does your health insurance cover dependent college students?  Are the items headed to campus with your child—such as a computer, bicycle or television—covered under your homeowners insurance?

Make sure you and your child are adequately covered by reviewing your existing insurance policies with your agent. Take advantage of the educational opportunity by including your child in the conversation. And be sure to reinforce common safety precautions so your son or daughter doesn’t allow open dorm rooms, unlocked cars and unsecured laptops to make him or her an easy target for thieves.

Budget
With your child’s first taste of real independence comes a fair amount of financial decision making. Will you be footing all the bills and funding every late-night pizza delivery? Or do you think it’s time your child starts to fend for him/herself?

Sit down with your child and discuss what expenses they’ll incur and how much money they’ll have. Be realistic. Encourage responsible spending. Discuss “want” versus “need”. (Replacing a broken cell phone is one thing; buying a new one because it’s cooler is another.) Then determine the best way to make sure those expenses are covered based on your individual circumstances.

Bank Accounts
Some parents choose to open joint accounts with their college students, allowing them to maintain some oversight of how the money is being spent. Others put the responsibility of an account squarely on the student’s shoulders. If this is the case, be sure to explain the benefits of online banking, maintaining a spending limit, and reconciling monthly statements against their own records of deposits and expenses.

Consider working with a bank that offers student checking or savings accounts. Often these waive monthly maintenance fees for students under age 25. Some also offer free check cards and an unlimited number of ATM/debit transactions.

Credit Cards
College students face a minefield of credit card offers as soon as they arrive on campus, none of which require parental approval.

To head off a potential buying frenzy, consider adding your child as an authorized user on one of your existing credit accounts or becoming a co-applicant on a new credit card in your child’s name. While you’ll ultimately bear responsibility for unpaid balances, you will receive monthly statements to help you keep tabs on your child’s spending. Another option is to give your child a pre-paid, reloadable credit card or a student card with a minimal credit limit. Both help teach valuable lessons on living within ones means while allowing him or her more privacy.

Professional Help
Don’t forget to take care of your own financial situation. Now that money is being spent on—rather than saved for—college, you may need to adjust your short- and long-term investment strategies. Take this opportunity to meet with your financial advisor and update your financial plan.