College Money Needs 101

By Kristi Vaughan

The money concerns of college students don’t end when you’ve figured out how to pay the tuition bill. In fact, with college marking the first step towards independence for many, the money management questions could just be starting. In what could be one of your last acts of parental guidance, here is a chance to help your son, or daughter, get started on the path of fiscal responsibility.

Budgets

Whether your child will have lots of money to juggle or just a bit, he, or she, should understand the basics of preparing and maintaining a budget. Suggest to your child that he start by listing potential expenses – books, laundry, midnight snacks, movies, phone calls home, etc. The next step is comparing these expenses to income. Are you providing your child with an allowance? Does he, or she, have any savings from summer jobs. Will your child hold a part-time job while in school? If there is a gap between income and expenses, perhaps you can suggest ways to cut expenses or think of earnings possibilities that won’t interfere with studies.

Checking accounts

College frequently marks the beginning of an active banking relationship. In helping your child chose a bank, you’ll want to consider factors such as location, fees, number of ATMs and even whether you can make deposits from your home town. Ask, too, if the bank offers special student accounts with reduced charges. An additional feature that your student might appreciate is online banking. Can they check their balance from the convenience of the computer in their dorm room? Can they transfer money from savings to checking without visiting a branch? ATM locations can be particularly important since many banks charge an additional fee to use their ATM if you are not a customer of that bank. So, while it may be more convenient for you as the parent, to deposit money into a hometown bank, those $1 to $1.50 charges can cut a deep hole in a student’s pocket!

Debit cards

When your student opens his, or her, checking account, he may also be asked if he wants a debit card. Like ATM cards, debt cards provide immediate access to money in the checking account. Unlike ATM cards, however, debit cards can be used to make purchases at thousands of merchants worldwide, including many fast food restaurants near college campuses. This makes them very convenient but also a potential budgeting hazard if the student isn’t recording what he’s spent! If your student takes this option, you might want to ensure that he or she has a full understanding of the card’s use.

Credit cards

Horror stories abound of credit card-fueled shopping sprees and weekend getaways totaling hundreds, or even thousands, of dollars. One of the great parental debates is whether to give your college student a credit card. If so, should it be a card linked to your account or one they hold on their own? No matter what the decision in that regard, the very talk of a credit card is a good opportunity to help your child understand the advantages and pitfalls of credit. To help you, consider turning to the major credit card companies, MasterCard and Visa. Both offer consumer education and tips on budgeting and handling credit.

There are a wide variety of cards your student could select, including those with rewards. As with any loan, credit limits will depend on credit history and assumptions about the ability to repay what has been charged. Some banks even offer graduated cards that sharply limit the amount of credit available the first year but increase it as the student, presumably, gains more responsibility and credit savvy.

Insurance

What happens if your child gets sick while in school? Or her laptop computer is stolen? Is she covered by your health and homeowners’ insurance policies? The answer is maybe, or maybe not. Much depends on the child’s age and whether he, or she, still is considered a dependent. Additionally, many homeowners’ policies have limits on the coverage they provide on items that are not at the principal residence. And, while a stolen computer might be covered, chances are a computer damaged by spilled liquids isn’t. Talk with your insurance agent to learn what limitations might exist on your policy and whether there are special coverages available.

Health insurance, too, bears looking at, especially if your out-of-pocket payments rise significantly when a non-network doctor or medical facility is not used. In addition to reviewing your existing health insurance, you may also want to compare coverage with health insurance offered through the college. This is important if the insurance company no longer considers your student a dependent.

So too, might you want to review your auto insurance. If your student is taking a car to college, rates might change because the car is now principally garaged elsewhere. Or, perhaps you can save money by letting your insurance company known that your student now will be driving your car only during vacations and summer break.