It’s an exciting time when a loved one is heading off to college.  If you are a parent, guardian, or relative, here are some financial tips we wanted to share with you before they go.  We think it is important for the student (and parents) to understand and have a financial plan for the full cost of college.

1. Create a spending plan. The cost of tuition, fees, and room and board vary from college to college.  If you have saved enough in a 529 for these qualified education costs, you and your student are lucky and in good shape!  However, don’t forget to include incremental expenses like traveling to and from school, items for their dorm room, dining out/food outside of their meal plan, entertainment/going out, parking, and Uber/ride sharing.  You and your student must agree on a monthly spending amount that you will contribute or that they are responsible for.  By working together at the start of college to build a spending plan, your teen will better understand the consequences of their financial decisions and have a realistic picture of their spending before the semester begins.
2. Open a checking account. While peer-to-peer (P2P) money transfers (e.g., Venmo) make it easier to split bills and pay friends for shared costs, most credit cards still expect payment from more traditional banking channels.   Consider opening an account in the student’s name with a credit union, bank affiliated with the school, or a convenient bank branch.  This could also save you on ATM fees.
3. Have the talk. Not that one, the other one.  Credit cards are not cash; they are credit.  A best practice should be that the student is responsible for paying off their monthly credit card balance.  As a parent/guardian, you must keep an eye on credit card balances and ensure the card is getting paid, but the student should be responsible for this.  It makes them keep track of their spending habits.  Don’t give a credit card to a teenager and tell them to use it when needed without setting up the semester-long spending picture we mention in our first point.
4. Check your insurance policy. See if the student’s dorm room is covered under your policy or if it might make sense to get dorm insurance. Dorm insurance is a form of personal property insurance that will cover the cost of your personal items in your dorm should damage or theft occur.  Depending on the plan, dorm insurance can also cover accidental and water damage and is usually cheaper than a renter’s policy.
5. Don’t forget about healthcare! Make sure the student has a copy of your health insurance policy numbers.  Also, obtain a HIPAA release form and healthcare proxy for the student.  Students typically are or turn 18 during their first year in college, which means that parents will no longer have access to their child’s medical records and will not be able to make any medical decisions without these documents in place.
6. Don’t forget about the Roth IRA! If the student worked or plans to work this year and will have earned income, make sure that they contribute to their Roth IRA. There is a good chance your student will be working with all the above extra expenses.  If the student is over 18, they can open a Roth IRA on their own.  If they are under 18, it must be a custodial Roth IRA.  The annual contribution can be their earned income or up to $6,500 annually.  All earnings grow tax-free.  Any distributions after age 59.5 are nontaxable, and contributions can be pulled out tax-free and penalty-free at any time.  As a parent, guardian, or relative, you can contribute on their behalf and give them an extra boost toward their long-term financial success.

Now that we’ve covered these financial tips, we will let you enjoy the rest of summer, and good luck getting them moved in!