By Ken Rosenbaum, CPA
The day has come. Your little baby has grown up and is now ready to leave the nest. He or she has graduated high school and is preparing for the next big step. Whether it’s college, a gap year, a year abroad or any other life adventure that lies ahead, this time can be filled with emotion for you and your child.
As departure day gets closer, you’re probably focusing on last-minute shopping lists and feeling overwhelmed with trying to get everything done in time. It’s all too easy for some important tasks to get lost in the commotion. So, here are six items you may have overlooked.
1. Make an appointment with your attorney to create a durable power of attorney document for financial matters and a health-care proxy.
Without them, in most states, you, as a parent, don’t have authority to make health-care decisions or manage money for your children once they turn 18. That’s true even if you are paying the tuition, have your child on your health insurance plans or claim your child as a dependent on your tax returns. Without such documents in place, if your child is in an accident and/or becomes disabled, even if only temporarily, you might need court approval to act on your child’s behalf.
2. Establish a monthly budget for your child.
The precise amount agreed upon in said budget is a personal discussion. However, it is especially important to set clear expectations about who will pay for what expense. Maybe you agree to pay for all school-related expenses and it’s your child’s responsibility to pay for all or some of the social expenses. Have this conversation early enough to allow your student time to find a good summer job to earn and save money for the upcoming year.
3. Determine whether your child will receive a credit or debit card and set rules around when to use each.
Educate your child about the difference between the two and, based upon your child, decide which is the better option. There are advantages and disadvantages to each. If your child is just starting to learn how to budget and balance a checkbook, beginning with a debit card may be best, especially for general daily expenses. Leave the credit card for larger expenses, such as travel arrangements, and emergencies.
Two important benefits of using a credit card are the ability to create a credit history and better security. Building a credit history can work two ways: you can create a positive credit record or a negative one. A positive credit history will become extremely important for your child in just a few short years. So, pay off the balance every month, don’t overspend, don’t let your child assume that you will bail them out every time, and help them understand how interest charges and late fees add up and are cumulative. In terms of security, Frank Abagnale, of “Catch Me If You Can” fame, does a good job explaining how consumer protection law treats debit and credit cards very differently.
Some simple steps you, as a parent, can take:
• Co-sign on the card.
• Start with a low credit limit.
• Ensure you have online access to the card.
4. Once on campus, make sure you and your child know where the closest hospital, urgent care and 24-hour pharmacy are located.
Find a good local physician in case your child needs medical attention above what the college health center can provide. Make sure your child carries his or her health insurance card and you have reached an agreed-upon way to pay for any medical expenses. Does your child know when to use the credit card versus the flexible spending or health savings account card?
5. Have your child write down all passwords to any digital profiles, including financial and social media accounts.
Keep this in a safe place at home. Your child may not like this, but explain that you are not doing it to invade privacy, but to protect it in case of an emergency. I recommend you review this list with your child before each new school year in case any passwords have changed.
6. Talk to your insurance agent and ask about covering your child’s belongings while they are living on or off campus.
The premiums associated with a dorm insurance policy or a renter’s insurance policy vary, but affordable options with an appropriate coverage amount and deductible generally are available.
While my list of must-do items can help ensure you meet certain financial needs before the first day of new student orientation, don’t neglect to prioritize the emotional aspect of dropping off your child at college for the first time. This event can be a special opportunity to connect.
Marshall Duke, a professor at Emory University, offers wonderful advice on this topic. He writes:
“Such moments are rare. They have power. They give us as parents one-time opportunities to say things to our children that will stick with them not only because of what is said, but because of when it is said….
This is a moment to tell them the big things. Things you feel about them as children, as people.
Wise things. Things that have guided you in your life. Ways that you hope they will live. Ways that you hope they will be. Big things. Life-level things.
Duke suggests writing your child a special note. Mail it, the old-fashioned way. He writes: “It will not be deleted; it will not be tossed away; it will be kept. Its message will stick. Always.”
At the beginning, it may help to think of your child as a high school student now in college. Your child will need to learn how to become a college student – how to study, how to eat, how to handle money – and thrive amid the greater independence. Remember, your child will learn many of the most important lessons to prepare for life ahead outside of the classroom.
Source: Loring Ward. All investments involve risk, including the loss of principal and cannot be guaranteed against loss by a bank, custodian, or any other financial institution. The views expressed represent the opinions of Loring Ward, which are subject to change and are not intended as a forecast or guarantee of future results.