For years, you’ve known this time was coming – the summer your child leaves home for college or another significant step toward an adult life independent of you. We know this can be a bittersweet season for families. After all, it’s been your job for 18 years or so to see that their health, safety, development, and general well-being are accounted for daily. Now what? How do you handle all of that from afar?
While Elements Financial cannot steer you toward all the answers, we can support you and your young adult in finding the right financial steps and tools for this phase. We understand that your ultimate goal is to help them continue learning and succeeding. As a benefit for you, when your student develops healthy money habits, you will feel more at peace.
This summer, consider all the following primary money-related behaviors. It’s important for their success and comfort to prepare financially in addition to setting up class schedules and shopping for dorm or apartment décor and supplies.
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:
- Your student will benefit from having 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.2
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.3
If you have an expectation that your young adult should contribute partially or fully to the price of their next endeavor, whether that be educational expenses or costs of living on their own, you must have that conversation as soon as possible. How will they earn income? With work-study on campus or a part-time job while going to school? Or should they be getting a full-time job now or maybe a paid internship next summer? 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.
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 directly to your assistance this summer. Our student loans experts are standing by to consult with you.
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.