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Family Finances

Mom, I Dropped My Laptop

Does your insurance cover your college kid? Should you cosign his lease? Answers to these and other cries for help.

A typical SOS from college student to parent used to be pretty simple: Please send money. Nowadays, getting a panicked call from your child can be a bit more complicated: a stolen laptop, an outrageous bank overdraft fee, an over-the-top cell-phone bill, a run-in with the landlord.

RELATED LINKS

Financial Survival Tips for Freshmen

To Students: Beware of Overdraft Fees

Our Paying for College Center

But just as in the old days, such emergencies still hit you, or your kid, in the pocketbook. Take a deep breath and follow our advice, and you'll get through the crisis with a minimum of damage to your wallet and your nerves.

"My laptop is in pieces!" If your child dropped the computer in the bio lab or spilled beer on the smart phone (or dropped the smart phone into the beer), your homeowners-insurance policy should cover the loss or damage as long as your student lives in a dorm. Call your agent to review the specifics of your policy.

To avoid paying a big deductible or filing multiple claims on your homeowners insurance, consider buying separate property coverage for your student's electronic devices. For example, www.safeware.com offers $1,000 worth of coverage on a laptop, with no deductible, for about $70 a year, and $400 worth of coverage on a BlackBerry for about $65 a year, plus a $50 deductible.

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Homeowners insurance may not apply if your student moves off campus. In that case, you can pick up a renters policy for $200 to $350 a year.

"I went over the limit on my cell-phone plan!" Let's face it. Asking kids to limit their text messages is like asking them to quit breathing. You might as well hand your student a bill for the extra charges and then upgrade to a cell-phone plan that includes unlimited texting, such as Verizon's Wireless Select, which starts at $60 a month for an individual and $100 for the family plan.

As for voice minutes, you can always bump up the number if the first plan proves too parsimonious. Parents who use their own minutes sparingly will save money by adding their student to a family-share plan.

Or push your kid out of the nest and into a prepaid plan when the current contract expires. That strategy protects you from youthful excess and teaches your student how to budget, says Joseph Pawlikowski, of Goingcellular.com, which reviews cell phones and service plans. "Once the minutes run out, they're gone." Virgin Mobile offers a plan that provides 1,000 voice minutes for $50; for another $20 a month, you get unlimited texting.

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Your student may claim to be hopelessly lost without a smart phone, but phones with Web access can actually perform wonders on an as-needed basis. Verizon's GPS-enabled phones, for instance, let your student download VZ Navigator for 24 hours, at $3 a pop -- letting you rest easier when he or she hits the road for an overnight trip.

"I overdrew my account with my debit card!" Contrary to what parents and students believe, many banks cover debit-card overdrafts -- and then exact a fee, typically about $35, for each transaction. Your student may be able to persuade the bank to waive the charge, especially if it's a first-time offense. Some banks, including Bank of America and Wachovia, anticipate that request by building one-time fee forgiveness or a fee refund into their accounts that are aimed at students.

As for the next time (and there will be one), consider having your student switch to a bank that automatically transfers money from savings to checking when the checking account runs dry. Or use a bank, such as ING Direct, that extends a line of credit for the overdraft at the prevailing interest rate. Many students use their debit cards -- which at some schools are linked to their student IDs -- for transactions as small as $1 or $2, according to the Center for Responsible Lending. Better to pay 17% on a $1 overdraft than $35 a pop.

You might ask the kid to try this novel idea: keeping track of the balance. With online accounts, students can eyeball the bottom line from their laptop or use their cell phone to take a peek. Mobile banking requires a Web-enabled phone that supports the bank's system. Fees depend on the cellular plan. Check the bank's Web site and the cell plan to get further details.

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Other student-friendly banking features include e-mail or text-message alerts that let account holders know when their balance is low. The alert system came in handy for Genna Salmon, a junior at Oregon State University, when it told her the coffee she had purchased with her debit card would put her bank balance under-water by 75 cents. She zipped over to the bank and added money to her account, sparing herself the frustration of paying that $35 overdraft fee.


"I need cash -- right now!" Electronic money transfers between bank accounts take one to three days to clear. If your child needs a cash fix right this minute, you may have to resort to a time-honored delivery system: Western Union. Its "Money in Minutes" service makes funds available for pickup at a Western Union office almost immediately, but the service is pricey -- $30 to send $300 from the Midwest to California, for example. You can send the money by phone or online, using your debit or credit card, or pay in person at a local Western Union office.

RELATED LINKS

Financial Survival Tips for Freshmen

To Students: Beware of Overdraft Fees

Our Paying for College Center

Parents who want to ensure upfront that their child has instant access to cash could set him or her up with a prepaid debit card -- say, through Obopay or PayPal -- and load the card as needed. The student can withdraw the funds at an ATM. You'll pay $10 a month to keep your kid's Obopay card activated plus 25 cents per transaction. PayPal forgoes the monthly fee but charges $1 for each ATM withdrawal. With both debit cards, other ATM fees apply.

You could also set up a joint bank account with your student, in which case you can link your main account to that one and transfer funds electronically to your student for immediate access. Or, for a low-tech way of getting money to your desperate son or daughter, simply withdraw cash from your own bank and carry it to a branch of your student's bank, where you can deposit it into his or her account.

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"You have to cosign my lease!" If your kid is already contemplating moving off campus, be prepared to field this dreaded phone call. Most landlords insist that parents guarantee the lease for college students, who typically lack a solid income or adequate credit history. Before putting your name on the contract, make sure the parents of the other roommates cosign as well, says Janet Portman, coauthor, with Marcia Stewart, of Renters' Rights (Nolo, $25). Otherwise, says Portman, "you're responsible for everybody's screw-ups."

Some landlords refuse to accept more than one cosigner. Others insist that the cosigner who lives nearest cover any damage, even if it was the other parent's kid who knocked the salsa jar onto the carpet. As a backup, have all the parents sign an agreement in which each promises to be responsible for damage or loss caused by his own child, says Portman. And each of you should outfit your student with renters insurance, which covers damage to the apartment as well as to his or her belongings.

Before move-in day, tour the rental property with the students and the landlord, noting any damage that already exists and discussing how the landlord expects the place to be left. Your presence will not only help avoid potential run-ins over the return of the deposit but will also let the landlord know that a grown-up is looking out for the kids' best interest.

"I don't know where all the money went!" With online banking, this excuse is lamer than Tiny Tim. Salmon balances her checkbook occasionally but mostly goes online to track expenditures, from pizza to textbooks, and settles up later with her parents. "When I come home, my mom and I look at my account and put down 'Genna' or 'Mom.' We can tell whether the purchase was for school or not," she says.

Students who continue to flunk the budget test can visit student-friendly Web sites such as Wesabe, Mint, Geezeo and Pear Budget. These free sites allow users to gather bank and credit-card accounts into one place and organize spending according to category.

Wesabe and Geezeo also offer social networking; users can share financial tips, goals and predicaments. In one recent posting on Wesabe, a grad student asked for advice on paying down $10,000 in credit-card debt. So far, the posting has elicited 37 responses.

But no shared wisdom or techie gimmick beats common sense, which for Salmon would mean curbing her latte habit -- or burying the expense in the petty-cash category. "I get a latte about four times a week, at $3 each. That's $12 a week -- it's ridiculous. My mom does the same thing, but she pays cash so my dad doesn't find out. That's what I should do."