Forget tuition. Once that bill is taken care of, the biggest financial challenge you face when sending kids off to college is making sure they don’t overdraw their checking account or run up a credit-card bill they can’t pay off. Here’s how to help boost their financial GPA (and save big bucks on fees).
Open a low-cost checking account in your child’s college town, especially if his current bank doesn’t have branches there. Pay close attention to the bank pitches you’ve been getting in the mail so that you can spot the best combination of low balance requirements and low (or no) fees. With a host of new regulations squeezing bank revenues, totally free checking will be harder to come by and may come with strings attached, such as a minimum number of required debit-card transactions. For help in searching for an account, go to www.checkingfinder.com.
Extra credit: Choose a bank with a network of ATMs that’s convenient to your child’s dorm or favorite hangouts. College kids are notorious for running up ATM fees by going to the closest machine, even if it’s not in their bank’s network.
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Set up an overdraft strategy. Students are also prime candidates for racking up charges by overdrawing their accounts with small purchases at the drugstore or coffee shop. As a result, they’re particularly affected by new rules that prohibit banks from automatically enrolling customers in pricey overdraft-protection programs. Now you have to actively select such a program or choose a less-expensive option, such as linking your child’s checking account to a savings account -- or letting him suffer the embarrassment of having his purchase declined (see Closing the Door on Overdrafts).
Extra credit: Have your child sign up to get balance alerts via e-mail or text when his balance is low.
Downplay credit cards. New rules require that young people under 21 have a co-signer when they apply for a credit card. Don’t be too quick to sign, or even to make your child an authorized user on your card (see Debit vs. Credit Cards for Kids. Your student should first be responsible enough to manage a checking account. If he doesn’t overdraw his account, he may be mature enough to handle a credit card. But don’t rush it.
Extra credit: Regardless of whether your child uses a debit or credit card, he shouldn’t get in the habit of picking up the check for group pizza or beer and expecting to collect from everyone else. That’s another big money pit for college students; even with the best of intentions, their buddies will never pay up.
Guard personal information. This is the Facebook generation, who will tell the world “everything but their underwear size,” as a friend of mine puts it. Better they should reveal the size of their skivvies than disclose their PIN or credit-card number, even to a friend (see How to Fix Your Facebook Settings).
Extra credit: Remind your kids that when they’re shopping online, they should look for secure transaction symbols, such as a lock in the lower right corner of the browser window and a Web address that begins with “https.” See 5 Tips for Safe Online Shopping for more advice.
Keep track of expenses at least for the first semester. Student services should be able to estimate how much the average student will shell out for entertainment, travel, food outside the dorm and other miscellaneous expenses. But your kid may not be average. He can monitor his own transactions via online banking. PNC offers a Virtual Wallet budgeting site for students (www.pnc.com). Or you can just buy your kid some bright green Post-its on which to jot down what he spends. Even if he doesn’t tally them, they provide a visual cue that his spending is mounting up.
Extra credit: Before your child leaves home, make it clear which expenses you’ll cover and which are his responsibility. Hint: He gets to pay $300 for a football season ticket.
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