When his daughter was looking at colleges, Dan Prebish, director of Life Event Services at Wells Fargo Advisors, approached things a little differently than many parents.
He raised the issue of college finances while on college tours, asking tour guides questions such as, “How much do you budget for meals outside of the dorm?” and “Where is the nearest ATM?”
Prebish found that sprinkling in financial questions provided an opportunity to get his daughter thinking about more than just the school’s curriculum, sporting events and Greek life.
Dinner conversations about schools she was applying to often featured discussions of scholarships. It was a strategy designed to help sensitize his daughter, Lydia, now 19 and a college freshman, to managing money.
Tracy Green, Tax and Financial Planning specialist at Wells Fargo Advisors, said money management is the most important lesson you can teach your children, because “they’ll need that in their college years and beyond.”
Green, along with Prebish and his wife, Anne, share some tips for parents to help prepare their children for the challenges that lie ahead when they’re living independently as college students.
Tip 1: Discuss tuition and responsibility: Green said that before even applying to college, parents need to talk with their child about what type of school is within the parents’ budget and what portion, if any, the child will be responsible for covering.
“Everyone needs to know up front what they’re going to be responsible for by the spring or summer before college,” she said.
Lydia Prebish, for example, pays for her own entertainment expenses, such as movies or meals at a restaurant with friends. She saved money from a summer job and also works on campus.
“I think it’s always valuable for kids to have work skills, whether you need the money or not,” said Prebish.
The independent source of income helps provide students a sense of satisfaction and self worth, he adds. Because Lydia works two four-hour shifts a week, it’s manageable for her. But Prebish said working, especially during the first semester as a student adjusts to college, may not be ideal for every student. Those who want to participate in many extracurricular activities or have a demanding curriculum may find it more difficult.
Tip 2: Focus on budget fundamentals: Anne Prebish said your children should learn the core concept of money, that is, understand how much money they have and know not to spend more than that.
“We have to be careful not to assume our kids know these things,” she said. Both she and her husband say it makes sense for kids to have a job the summer before college so they can accumulate savings. But managing that money during the course of a six-month semester can be a challenge.
They suggest sitting down with your child and dividing the total amount of money available by the months at school to determine a monthly budget.
“The first semester is about learning and keeping track of how you’re spending your money,” Anne Prebish said.
Tip 3: Think about debit and credit cards: The Prebishes and Green agree that a debit card is a key way to help students manage money. Dan Prebish said it’s an easy way to pay for items such as books, while Green adds it has oversight value — parents can limit spending on the card to the checking account balance.
She also suggests that parents get their child a secured credit card, where the parent fronts the cash deposit but the child is financially responsible for making on-time payments, as this is a way of helping the child establish a credit history without giving him or her free rein over a traditional credit card.
Tip 4: Don’t forget their health: Dan Prebish recommends verifying in advance what your insurance covers while your children are at college, specifically whether they’ll be covered for visits to a clinic on campus or whether the school requires that you purchase their health insurance.
Make sure to schedule routine medical or dental appointments during summer or school breaks so that they don’t go by the wayside.
And he said, it’s essential for a child to have his or her own durable power of attorney authorizing a parent to make financial or legal decisions if the child is incapacitated. A durable power of attorney for healthcare is also recommended, since professionals aren’t authorized to share medical information with parents without explicit permission if the child is 18 or over.
He suggests scanning those documents onto the child’s phone and keeping a copy for yourself, so the documents are readily accessible. Green adds that doctor’s phone numbers and medical and insurance information should also be kept on the child’s phone.
Tip 5: Empower your children to ask for help: One suggestion Anne Prebish considers critical is to send the message to your college-aged children that just because they are adults living on their own, asking for a parent’s advice isn’t a sign of weakness.
“Part of being an adult is realizing other people are there to help you,” she said. And parents shouldn’t think they’re hovering if they assist.
“We have consistently been there giving our daughter our 2 cents and also letting her make choices,” Anne Prebish said.
Those discussions on college survival skills have helped their daughter transition well to her new environment.
“She was prepared for anything we could prepare her for,” she added.
This article was written by/for Wells Fargo Advisors and provided courtesy of Whitney McDaniel, CFP, financial advisor in Beaufort at 843-524-1114. Any third-party posts, reviews or comments associated with this listing are not endorsed by Wells Fargo Advisors and do not necessarily represent the views of Whitney McDaniel or Wells Fargo Advisors and have not been reviewed by the firm for completeness or accuracy.