Protecting The Purse In School

College students face responsibilities away at school that they did not have at home. One is managing money.

Young adults might relish the opportunity of being responsible for their own cash, while parents cringe at the thought. To ease fears, Ray Martin gave parents advice on The Early Show.

First, Martin says, parents and students need to sit down and figure out how much money college is going to cost each year. Of course, a large chunk of this is tuition and room/board. But parents need to take a serious look at all "extras" that can really add up — computer supplies, laundry, trips to the infirmary, dorm fridge or microwave, tickets to college football games or performing arts events.

These extras and any other "entertainment" expenses could total between $2,000 and $5,000 a year.

Once an acceptable amount is determined, Martin says, parents and students should discuss who will pay for what. Will Mom and Dad pick up the tab for everything? Just tuition? A certain amount of entertainment expenses each month? Both parties must make this clear and stick to the agreed-upon plan, according to Martin.

Finally, parents must decide how the student will get the money they agreed to give — in a lump sum or monthly installments? Many financial experts agree that monthly is the way to go because students won't be tempted to spend it all in the first months. If a student does spend too much one month, that will be apparent immediately and he or she can figure out how to handle finances differently next month.

There are a couple of financial tools students are going to need while they're at school - a checking account and a credit card. Martin provided some do's and don'ts for establishing these tools:

STUDENT CHECKING ACCOUNT DO'S

• Join local bank/credit union: Even if a student never writes a check, parents better believe he will be making plenty of ATM withdrawals. Parents need to make sure his bank offers several convenient ATM locations to avoid out-of-network ATM fees. Also, local banks and credit unions often offer free checking or student rates.
• List them in the student's name: Parents don't want any financial mistakes made by a student to appear on their credit reports. Also, having two Social Security numbers associated with the account only doubles the trouble in the case of identity theft.
• Request duplicate statements: This allows parents to keep an eye on the student's financial activity and step in when necessary.
• Consider debit card limits: Parents should ask about placing limits on cash withdrawn and spent daily and annually. This might be a wise safeguard for some students.

• Don't get overdraft protection: It's not OK for a student to overdraw an account. Plus, nobody needs to pay the fees associated with this.
• Don't print addresses on checks: Let's face it — students lose things. Having an address on a lost checkbook opens the door for identity theft.
• Don't link accounts to a student ID: Many universities now offer "smart cards" which allow university-issued IDs to be used for prepaid expenses such as meal plans, and can double as a debit/ATM card. Martin suggests keeping student IDs and bank accounts separate for two reasons: it keeps expenses covered by parents separate from student spending money, and it avoids any problems if the ID is lost.

STUDENT CREDIT CARD DO'S

• Discuss proper use: Parents should make sure students understand how credit cards work and the consequences for not following the rules. Both parties should come to an understanding on what the card will be used for — financial "emergencies" such as car repair, etc.
• Consider a pre-paid card: This safety net allows parents to set a dollar amount on the card so nobody has to worry about the student driving up a large balance. It may surprise students how easy it is to reach this set amount.

• Don't obtain multiple cards: The average freshman is offered eight cards in the first semester. One is plenty. Also set the card limit at $1,000. This insures that the amount of debt incurred is manageable.
• Don't co-sign an account: The same reason parents don't want to be part of their student's bank account applies here. Martin says parents should not put themselves at risk while teaching students about money.

• Medical Coverage: Parents' health insurance usually covers college students. Inquire how this applies when away at school or abroad. Are the university's health facilities part of the parent's insurance network or will using their services result in out-of-network costs?
• Car Title and Insurance: Ray advises parents to transfer a car's title to the student's name, requiring them to register and insure it on their own. This protects parents from liability while forcing the student to realize what it costs to own a vehicle.
• Phone Bills: Long-distance bills skyrocket once a students goes to college. Phone calls to boyfriends, high-school friends and parents can really add up. Look into prepaid phone cards that offer rates of five cents a minute or a cell phone plan with tons of evening/weekend minutes.
• Living Will: Hopefully, this will never be an issue. However, Martin believes students need to discuss their wishes and name someone to make necessary decisions. Having a lawyer conduct this conversation will really bring the point home to students and may make them think just a little bit more about their safety. Also, students with assets should think about jointly titling those with parents.