7 things you and your student should discuss before they head off to college:

August is upon us and the neighbor kids have transitioned from high school graduation parties to packing for college.  I am sure their parents are wondering and worrying if they gave them all the right advice and encouragement they will need to get through the next 4 years.  Although I still have a few more years before I have that worry, I have started a list of financial advice to pass along to the college bound teens.

To the students:

1. Use a budget; whether your source of funding is your parents, your own savings, student loans, or a part time job at school, know how much you have to spend each month and stick to it.  Regardless of the source of funds, chances are it is not a bottomless pit, and they ALL come with strings attached one way or another.
2. If you have a credit card, use it only for emergencies.  –not late night pizza, or a cool new electronic gadget, or a spring break trip.  These things tend to build up slowly over time, and before you know it, you have real debt trouble.  It may get difficult to make payments on time and if you are only paying the minimum, it could take years to clean up.  All the while interest cost, l late fees, over limit fees, etc. can pile up, so that late night $10 pizza could cost hundreds.
3. Credit card companies will start to target students will all kinds of offers.  Not all credit cards are bad, and when used responsibly, they will establish a credit history and actually help you post- graduation when you apply for loans to purchase a car, your first home, etc.  When applying, be careful to read the fine print.  Pay attention to things like special “introductory rates”, future rate adjustments, annual fees, grace periods, etc.  Don’t fall for the Free-bees they will offer you just for filling out the application.   Even filling out a “harmless” application to get that “free” T-shirt can cost you.  Too many credit cards can negatively affect your credit, as can too many credit inquiries within a certain period of time
4. If you make a purchase on the card, pay it off quickly and make the payments on time.  Many have substantial late fees that add to your bill, and default rates over 20% that kick in if you have multiple late payments. 

To the Parents:

1. Don’t take your hands off the wheel just yet…  If you don’t think they are ready for a credit card, help them set up a checking account with a debit card for purchases, it will be easier to track how they are spending money, and more secure than cash.  If you are their primary source of funds while they are at school, you can fund up to a set amount, and monitor it on line.  Also, don’t give them your card to use except in the case of an extreme emergency.  You remain liable, and any action they take with your card affects your wallet, and potentially your credit score. 
2. Healthcare considerations:  At 18, federal law (HIPPA, FERPA) protects student privacy, including from parents.  To allow a parent to assist a child/student with medical matters, consider executing a Healthcare Power of Attorney (HCPOA) to make medical decisions on their behalf, HIPPA release to obtain authorization to access medical information, and a FERPA waiver to access education as well as health records while at school.  NOTE: keep signed copies available when you or the student travels, i.e. flash drive, secure website.
3. Property and Casualty Insurance – Talk with your agent about discounts on the students auto if they leave it at home and don’t drive it at school and discounts on the family car for not having a student driver while in school.  Also consider covering the student’s expensive items like computers and electronics under your homeowners or renters policy.  Consider deductibles, limits, consequences/cost of extra claims on homeowner’s policy.