Five Things Parents and Students Need to Do this Summer

Last Updated May 11, 2011 8:10 AM EDT

A few days ago I wrote about some of the money matters students and parents will need to deal with when the student leaves home for school this fall.

Here are a few more of the financial decisions that confront students and their parents.

Credit Cards

According to the CARD ACT, this new law restricts people under 21 from getting new credit card accounts on their own unless they get co-signers or show they have the means to pay the bill.

This doesn't mean students will not be offered credit cards on campus. Credit cards will still be offered indirectly as part of a marketing promotion for banking accounts. And students under age 21 do not have to have a parent co-sign for the card. They can ask an older sibling or friend.

The main reason students give for applying for and using credit cards is a good one: to establish and build their credit profile. What they need to know is that this can backfire as too many credit cards and late payments can create a poor credit rating. This may not seem like a big deal until they get turned down for a car or home loan or even worse a job. Many employers check credit reports and turn down applicants who have poor credit ratings.

Since there are many downsides to joint credit accounts, I advise parents to never to sign jointly with their student on credit cards. This is an invitation to credit problems and identity theft when a student's wallet or purse is lost or stolen.

Instead, set up the credit card account with daily and total limits for transactions. Parents who want to monitor their student's use of credit can set up the account to receive duplicate statements and have on-line access to view the account activity.

Health Care Proxy and Living Will

I advise parents to make sure their student completes a Health Care Proxy and Living Will. These advance directives help to avoid making difficult decisions under duress. Although you can do this yourself, I advise parents to set up a meeting with their child and an attorney as it is a good learning experience. Also, if your student has assets in their own name, they should think about jointly titling the accounts with their parents, establishing a POD designation on the account or getting a will.

Health Insurance

Under the Affordable Care Act, the new law now extends health insurance for all dependents up through age 25. Parents and students need to inquire how the student's medical coverage works when away at school. They also need to know how they are covered when using the college infirmary or out-of-network medical service providers and when the student is traveling abroad.

Calling Home

Prepaid phone cards that offer economical rates are a good idea for budget minded students and their parents. Also consider a cell phone plan with large buckets of minutes for evening and weekend use. These provide virtually unlimited use and lower costs when use is restricted to these times.

Car and College

When a student is taking a car off to school, I advise parents to transfer the title to the student's name, requiring them to register and insure it on their own. This protects the patent from liability and is also educational for the student.

It's also worth it to have your student to take two courses: basic auto maintenance/repairs and safe driver's education. These can pay for themselves many times over by avoiding common repair scams and reducing insurance premiums.

  • 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 and on NBC-TV's morning newscast TODAY. He has also appeared on the Oprah Winfrey Show and is the author of two books.