Off to College

WHEN YOU SEND YOUR teenagers off to college, you might include four tools in their financial backpack: a checking account, credit card, renter’s insurance—and some sound advice.

Checking accounts. Favor checking accounts where your kids won’t get charged a monthly maintenance fee and where they have access to a large number of fee-free ATMs at both college and home. Also make sure the account is set up so your children can’t overdraw, and hence incur hefty fees, with ATM withdrawals or debit card purchases.

Credit cards. Many financial companies offer credit cards specially geared to students. This can be a good way for your kids to start building a credit history.

Alternatively, if your credit card company allows it, you might add your teenager as a joint accountholder to a credit card you already have. This can have a magical effect: You may discover that the card’s entire history is added to your kid’s credit report—and suddenly it will look like your teenager has been responsibly using a credit card for many years.

Instead of adding your student as a joint accountholder, you could add him or her as an authorized user. This, however, probably won’t be as helpful in establishing your child as a good credit—and it may not help at all.

Renter’s insurance. This is often recommended for college kids, so they’re covered if their bicycle is stolen or their computer is destroyed in a fire. Would replacing your student’s possessions cause real financial hardship? If the answer is “no,” maybe you should skip the coverage.

Have the talk. Spend some time talking to your kids about the dangers of overspending. Discuss what they can charge to the credit card. Emphasize that they should tell you early on if anything goes awry—financially or otherwise—at which point the problem may be more easily fixed.

Not sure your teenagers will be financially responsible? You might keep them on a shorter leash by giving them spending money every two weeks or every month, rather than giving them a big chunk at the start of each semester.

For general information about paying for college, spend some time perusing the chapter on college.

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