For years, you’ve known this time was coming – the summer your child leaves home for college or another significant step toward independence. We know this can be a bittersweet season for families, that’s why our credit union experts are here.
We can support you and your young adult in finding the right financial steps and tools for this phase. Point to us to help your student develop healthy money habits so they can focus on succeeding academically.
SPENDING
This is likely a top concern for parents and guardians. That’s why it’s important to think and talk about it and have a plan before they depart:
- Have accounts in their own name. This might include savings and checking accounts, a debit card, and possibly a credit card – also with the option of you as a joint accountholder to monitor their transactional activities. Setting things up with your child as primary will assist them with building credit at an earlier age. This will help them get apartments and loans over time.
- Consider giving your child direct online and mobile banking access. This way, they can actively monitor and manage their day-to-day spending. You can also maintain online banking access to their accounts if you’re a joint owner.
- Determine a weekly or monthly budget they can access and spend. You might transfer that amount from an account of your own and/or their own savings account where they have kept funds from a summer job, local scholarships and/or graduation gifts from family and friends.
SAVING & INVESTING
If you’ve saved well for college up to this point, you don’t have to stop. And if you haven’t, it’s not too late to start. A 529 account is typically the savings vehicle used for education.
According to Indiana’s CollegeChoice 529, “the money in your 529 account can be used for any purpose. However, to qualify for federal tax-free withdrawals and avoid penalties, the money must be used for qualified higher education expenses for the beneficiary at an eligible educational institution...such as, tuition, computers, mandatory fees, books, supplies, and equipment required for enrollment or attendance; certain room and board costs if the beneficiary is enrolled at least half-time; and certain expenses for a special-needs student.”1
Conversely, it’s also important to become familiar with expenses that do not qualify for fee-free withdrawals. For instance, transportation costs and insurance premiums do not qualify.
Lastly about 529s, there is no age limit for an account, so it’s not just for children and any unused funds are typically transferable to other family members. That’s why, as your student begins college, you can keep on saving in an existing account or even start an account now.2
EARNING
If you have an expectation that your young adult should contribute educational expenses or costs of living on their own, it’s important to have that conversation as soon as possible. Sit down and have an in-depth discussion about what makes the best sense for your student. If they’re entrepreneurial in spirit, ask for their own creative ideas – maybe they want to offer tutoring within their strongest subject or open an Etsy shop to sell handmade items.
In addition, it may be helpful to talk about a comfortable budget to teach your student the importance of saving.
BORROWING
At this point, you probably know your child’s plans for this fall. If the cost of their education or training exceeds your savings and their financial aid package, you might need to look for other sources of private funding. That’s where Elements can come in. We have several different funding options for college and graduate students that fills the financial gap.
Contact Elements Financial for support of all your current financial needs — and congratulations to your student and your entire family! This is an exciting time. Embrace it, stay calm, and have confidence in your parenting – may they be good and ready for this next chapter, thanks to you.
