Financial Tips for Parents Sending Kids to College

Sending a child to college is a momentous occasion, often bringing pride and excitement to families. Whether in or out of state, college is a significant milestone for your child as they embark on adulthood. But with change comes financial considerations that must be addressed beforehand. This article provides actionable tips for parents, covering everything from insurance updates to fostering financial literacy in your budding student.

 

The 8 Financial Tips

1. Open a Checking Account
   • Ensure that a checking account is established with a local bank or credit union to allow easy access to cash and income from part-time jobs. If needed, remind your child to connect a previous checking or savings account with the new one, so that money can be transferred within 3 business days.

 

2. Discuss Financial Responsibility
   • As your child dives into the excitement of campus life, budgeting and tracking expenses may not be top of mind. That’s why it’s essential to start this conversation early—and revisit it throughout their college years. Free budgeting apps (with optional premium features) can help students monitor their spending and income, laying the foundation for long-term financial health.
   • “With great power comes great responsibility”, or in this case, turning 18 opens the door to credit card ownership. While a great tool to build credit, it can often be misused, leading to costly mistakes. Talk with your child about the importance of paying bills on time, keeping balances low compared to their credit limit, and reviewing their credit report annually for errors or signs of identity theft. Many credit card companies offer automatic payment options and credit score tracking to make responsible use easier. Credit card rewards programs, like point systems, can be appealing but potentially misleading. While earning points is a perk, it’s important to avoid overspending just to chase rewards. In other words, don’t let the points tail wag the credit card dog.
   • Beyond cautionary advice, emphasize the long-term benefits of building strong credit. A solid credit score can make a big difference when applying for a car loan, a mortgage, or even renting an apartment—making responsible credit habits a valuable investment in your child’s future.
   • Lastly, it’s important to cover the fundamentals of retirement saving—especially the power of compound interest. The earlier your child begins to save, the more time their investments have to grow exponentially. Online compound interest calculators can be a helpful way to show how time influences growth and can make it easier to illustrate how starting now could lead to significantly greater returns in the future.

 

3. Review and Update Insurance Policies
   • If your child is bringing a car, make sure to update your auto insurance. Additionally, discuss health insurance with your child. Many universities offer campus healthcare, which is typically more affordable and convenient than going to urgent care or a primary care doctor.

 

4. Obtain Key Legal Documents
   • Having a medical power of attorney and HIPAA authorization is crucial if you are ever needed to assist in emergencies. Make sure your child gives you or your spouse’s name as the emergency contact when filling out medical paperwork.

 

5. Encourage Retirement Saving Early
   • If your child earns income from a part-time job, consider encouraging retirement saving by matching their earnings in a Roth IRA. This type of account allows contributions to grow tax-free until they’re withdrawn at age 59½, or earlier under specific exceptions. Be sure to review the contribution rules carefully and make it clear to your child that this account is intended strictly for retirement.

 

6. Review 529 Plan Allocations
   • Ensure that your child’s 529 plan is allocated conservatively, assuming that funds are to be withdrawn soon.

 

7. Understand the 529 Withdrawal Process for Making Qualified Distributions (or ESA, UTMA, etc)
   • Navigate to your respective 529 plan’s website to understand the withdrawal process for making qualified distributions. For ESAs, consult with your financial institution on proper withdrawals. For UTMAs, understand that once your child reaches the age of majority (typically 18, but may vary by state) they own the funds in the account and therefore can spend the funds on anything.

 

8. Consider Working with a Financial Advisor
   • If you want a second pair of eyes to review your plan, consider reaching out to a financial advisor.

 

Preparing to send your child to college is much more than packing and registering for classes. Having conversations around conscious spending, compound interest, and building retirement savings is crucial to their journey towards financial independence. By starting early and staying engaged, you empower your child to make informed decisions and build a future rooted in confidence and stability.

 

Antigone (Tig) Zervas, FPQP®
Associate Financial Advisor

 

This material is for informational use only and should not be considered investment advice. The opinions expressed are those of Alaska Wealth Advisors, LLC as of the date of publication and subject to change without notice. Alaska Wealth Advisors, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Alaska Wealth Advisors’ investment advisory services can be found in its Form ADV Part 2 and/or Form CRS, both of which are available upon request.