When a child goes off to college for the first time, it can be daunting. Many young adults have no idea how to live apart from Mom and Dad, much less worry about their finances. What do they need to know? How should you prepare your child for the days and months to come? What tools can you give your child for building financial success while still in school? To answer these questions, we have to begin with the basics.
Who is paying for day-to-day expenses?
This question should be addressed the moment your child decides on their school of choice. It’s especially important when students are living independently from a parent(s) for the first time. Acknowledging the cost differential by location for a metropolitan vs a small-town institution, and planning for them is a factor. There are a few points of conversation before you wave goodbye.
- Does the student have savings, a part-time job or other resources to contribute to their daily living expenses?
- Who is paying everyday bills like food, dining out or food delivery, clothing, entertainment & social club dues?
- Have you considered a monthly or bi-weekly payment to encourage money management and budgeting?
- Does the current auto insurance provide appropriate coverage for a vehicle while at school?
- Is housing on or off-campus? When living in off-campus housing, who actually pays the monthly rent?
- Do you have renter’s insurance purchases to cover your child’s belongings for loss or theft?
- If a parent’s name is on the lease agreement, do you need to add the address listed to your liability insurance?
If your name is on your child’s lease and you’re paying their rent, ask your insurance carrier as you may want to have this address listed on your liability insurance. If anything happens to this property while your child is living there, you can be financially responsible for any repairs or accidents. Make sure you cover yourself and plan ahead for any unforeseen issues that may arise.
If your child is attending school full time, you might need to pay their bills or add supplemental income in addition to their part-time job. It is important to establish what you will provide and what is their obligation so that your child is not financially blind when going off to college. For example, you might pay their rent, but their cell phone is their responsibility. Make it known up front what your child is responsible for financially.
You’ll want to sit down with your child and form a plan that will help them succeed. Not only does this enable them to be competent with money as they step out into the world, it will help you to have peace of mind as well.
Should they have a credit card?
Another thing to consider is whether or not they should have a credit card. What are the rules surrounding using the card? Can they have it for everyday use or is it for emergencies only? What constitutes an emergency?
Clear and set boundaries need to be made with an emergency-only credit card. Cards used for this purpose are only for certain scenarios, such as the car breaking down, a stolen purse, or an injury of some kind.
On the other hand, a card for everyday use can be used to buy groceries, purchase gas, or clothing they might need. The idea is to establish expectations of your child with this card. You’ll also want to keep a keen eye on the credit card bill.
The bottom line should be obvious: your child should not use an emergency-only card for everyday expenses. Make sure your child knows the difference and asks you first before they use the emergency card for something that isn’t quite an emergency.
What to do for medical emergencies
When your child has graduated high school and is ready for college, they will be an adult. You will no longer have access to their medical record. You will want to obtain a HIPAA release and for your child to appoint you a medical power of attorney. This will allow you to make critical decisions and have access to their medical records should you need to. This is vitally important and something not many parents think about when looking at the year ahead. A medical power of attorney is something you don’t need until you need it. By that time, however, it will likely be too late to obtain one. Keep one step ahead by taking this precaution.
Plan their tuition ahead of time
The moment your child has been accepted, it’s time to start thinking about their tuition fees. In the excitement of preparing your child for a new season of life, planning for tuition can get lost in the shuffle. Parents cannot access the student account as your child is now an adult. You will need to stress the importance of providing you the bill that it be paid in a timely manner. This must be done in order to avoid dropped classes due to late payment. If you are planning to use 529 education accounts to pay, be aware these payments can often take one to two weeks for processing. Many families have hit snags if the first tuition payment has not been made. You’ll want to keep on top of your child’s tuition and fees so that these pitfalls will not come upon them. Be proactive, pay the college tuition fees, and by doing so, you will make sure your child is on the right track from the onset.
Once you establish these financial goals, your child will be ready to leave for college.
If you would like more information on getting your financial house in order, please visit our homepage to sign up for our newsletter.
Follow Organized Instincts on Social Media: