With the high school graduation celebrations in the rearview mirror, it’s time to prepare your child for the next big chapter in their life – heading off to college. For parents, the transition of sending their child into the real world on their own can be difficult, especially if they are attending college out of state.
You’ve always been there for them, guiding and providing support throughout the years. While you might not be by their side physically, with the right financial tools, you can ensure they are well cared for, and if necessary, your support is just a few taps away.
In this article, we’ll highlight five tasks that parents can complete to provide peace of mind for themselves and their college-bound child.
#1 – Open Their Own Accounts
Before your child heads off to college, it’s critical that you open their own financial accounts. Even if they are attending school across the country, opening accounts at the credit union provides significant benefits that we’ll reveal shortly.
Start with the basics. Your college-bound child should have the following accounts:
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Savings Account:
This account allows your child to keep money earmarked for future costs out of their everyday Checking Account. Too often, young adults “accidentally” spend extra funds in their Checking Accounts. Explain that their Savings Account holds money for upcoming expenses, such as groceries and school supplies.
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Checking Account:
Their Checking Account will serve as their everyday financial account. All purchases will flow from here, and it’s important that they learn to monitor their transactions and balance their accounts daily.
#2 – Practice with Their Debit Card
As parents, we often overlook the basics when it comes to teaching our kids how to manage money. While swiping your debit card might be second nature to you at this point, it’s likely entirely new for your child.
Explain that their debit card is linked to their Checking Account, and all transactions will affect their balance. One of the most important things to highlight to young adults is that not all transactions are immediate. While most are processed quickly today, some retailer transactions may not appear for a day or two. They need to learn to track their purchases and keep a close eye on their balance.
Practice the following four transactions with your child:
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In-Store Purchase:
Make a purchase at a store so they understand the process of using their card, including entering their debit card PIN at checkout. It’s good practice to have them keep the receipt until they see the transaction has been withdrawn from their account.
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Online Purchase:
Next, have your child buy something at an online retailer. Ensure they understand how to enter their debit card details and explain key components, such as the CVV code and expiration date.
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ATM Withdrawal:
Stop by a local ATM and walk through the steps of withdrawing cash. You can also show your college-bound child how to check their balance at the ATM. Explain that some ATMs will charge fees and use the credit union’s ATM finder to locate surcharge-free ATMs in their area.
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Cash-Back Purchase:
If there are no surcharge-free ATMs in the area, or your child doesn’t want to make multiple stops, they can quickly and easily withdraw cash at most grocery stores and major retailers, like Walmart and Target. Explain how they select the Cash-Back option when checking out. It’s important to have your child keep this receipt until the purchase clears their account. Often, younger members forget to add the “cash-back” they received into their budget.
#3 – Review Common Digital Tools
Teaching your child how to utilize Online and Mobile Banking is critical for their success. There are many tools that can keep their finances in check, help them spend responsibly, and provide peace of mind for you.
Here is a list of popular tools to review with your child:
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Checking Balances & Monitoring Transactions:
When logging into Online or Mobile Banking, your child will see their current account balances. If they click a specific account type, such as Checking, they will see all their current and past transactions. Teach them to practice a “daily money minute” where they log into their accounts and review their balances and current transactions.
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Transferring Funds:
Show your child how they can quickly and easily transfer funds between their Savings and Checking Account.
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Enabling eAlerts & Notifications:
Help your child set up eAlerts and notifications. You can customize their alerts to include items such as low-balance alerts or new deposit notifications. Life can be distracting for busy college students, so these alerts are invaluable in helping them stay on top of their finances.
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Setting Up Online Bill Pay:
Practice setting up a bill to pay via Online Bill Pay. This step helps provide peace of mind for parents as much as it does for the college student. You can both monitor when bills are due and ensure payments are made on time. You can also set up automatic or recurring payments to guarantee a bill is never late or missed.
#4 – Link Your Credit Union Accounts
The greatest peace of mind tool for parents is the ability to link their account to their child’s. Even if they are attending school across the country, when you all have accounts at the credit union, it’s like you’re both side-by-side all the time (financially speaking).
When you link your account to your child’s account, you can:
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Check their account balances & monitor transactions.
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Instantly transfer money to their account, if needed.
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Schedule or pay upcoming bills for them.
NOTE: While parents can monitor their child’s account, their college-bound student won’t be able to view or access their parents’ account.
#5 – Open a Credit Card
Many parents are reluctant to open a credit card for their child, which is understandable. Many of us experienced financial hardships when we were younger due to credit cards. However, establishing a credit card for your child does two important things:
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Emergency Funds:
If your child is away from home and faces a sudden financial emergency, a credit card can be a lifesaver. Whether it’s the need to fix their car or unforeseen medical expenses, your child has the support and tools they need to manage the situation responsibly.
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Establish Good Credit:
While your child likely isn’t running out to buy a car or house anytime soon, establishing their credit history now is a smart move. Have your child use their credit card once a month for a small purchase, such as filling up their car with gas. Then show them how to manage their balance and make timely payments.
Regular purchases and on-time repayments will help them build their score throughout college. Once they graduate, they will have more options and better approval rates when looking to buy a car or lease their first apartment on their own.
TIP: Payment history plays the most significant role in determining a credit score. As a safeguard, parents might want to set up autopayments for the minimum payment due on their child’s credit card. This step ensures the child’s credit is protected and provides peace of mind for the parents.
We’re Here to Help!
Sending your child off to college is a bittersweet moment for parents. You’re proud of all they’ve accomplished and are excited to see what they will make of their life – but you also lose that ability to be by their side to help and guide them. However, with the right financial tools, you can keep an eye on them and provide any support they need instantly.
If you have questions about the tools available for young adults and parents or want to open an account for your college-bound student, we’re ready to help. Please stop by the Credit Union or call 410-908-7618 to schedule an appointment.