A financial plan for college-bound students

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(MoneyWatch) This fall, millions of students will go to college campuses across the nation. As a result, students and their parents face a number of important decisions and transactions that affect their finances.

Here are a few things parents and students need to think through:

Health insurance. Since the Affordable Care Act requires plans and issuers that offer coverage to children on their parents' plan to make the coverage available until the adult child reaches the age of 26, a parent's employer-provided health plan coverage will now cover dependent students while they attend school. Parents and students need to inquire how the student's medical coverage applies to the student when at school or abroad. They also need to know how they are covered when using the college infirmary or out-of-network medical service providers. Also confirm that co-payments and out-of-pocket costs will continue to be eligible for reimbursement from flexible spending plans.

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Student ID. At many colleges, the school-issued ID card doubles as a smart card, which can be used for prepaid expenses such as meal plans and can also be linked to a local bank account and used as an ATM/debit card. The student ID should be kept separate from parents' bank accounts for two reasons: It keeps parents' expenses separate from those of the student and minimizes the risk of fraudulent access to the parents' bank account if the card is lost or stolen.

Prepaid phone card: Most college students have cell phones and parents often complain about cell phone bill shock. To help avoid surprises, compare cell phone plans. Before you buy, check cell phone reception online. Also, consider prepaid phone cards that offer low-cost rates - these are a good idea for budget minded students and their parents. Also get a plan with large blocks or unlimited texting minutes.

Plan for auto repairs: When a student is taking a car to campus, it's worth considering having parents transfer the title of the car to the student's name. It will require the student to register and insure the car on their own and protects the parents from liability. It's also a great idea to require the student to take two courses - basic auto maintenance/repairs and defensive driving education. These can pay for themselves many times over by avoiding common repair scams, promoting safe driving skills and reducing insurance premiums. It's also worth considering getting students their own AAA membership.

Advance directives: Parents should make sure their student completes a health care proxy and living will. With these advance directives in writing you will never be in a position to have to make these decisions in an emergency. Although anyone can get these forms and complete these themselves, I advise that parents arrange a meeting with their child and an attorney to do this. Also, students with assets should think about either jointly titling assets with their parents or getting a will.

  • Ray Martin

    View all articles by Ray Martin on CBS MoneyWatch»
    Ray Martin has been a practicing financial advisor since 1986, providing financial guidance and advice to individuals. He has appeared regularly as a contributor on the CBS Early Show, CBS NewsPath, as a columnist on CBS Moneywatch.com and on NBC-TV's morning newscast TODAY. He has also appeared on the Oprah Winfrey Show and is the author of two books.

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