If you have a child heading off to college this fall, be sure he or she has the bank services needed to manage financial affairs easily when far from home. Take time to go over all accounts, explain the student’s responsibilities and limits with money, and make a plan for emergencies. Having everything organized will help your young scholar focus on studies without unnecessary distractions.
Your freshman may need to open a checking account for the first time, to handle paying for day-to-day expenses like snacks or cell phone bills. You don’t have to opt for the big bank on campus. Look for financial institutions offering student-friendly checking accounts with benefits like low minimum balances, convenient ATMs, mobile access and other perks. Some banks offer no-fee checking accounts, such as Washington Federal’s Basic Checking, that are well-suited to college life.
Online and mobile access
Help your student set up an online bank account and download a mobile banking app to make it easy to check balances, transfer funds and make payments from the comfort of his or her dorm room, at any time of day or night.
Online banking also makes it simple for parents to transfer money when funds run low. And kids can easily deposit paychecks from work-study jobs with their mobile device, without having to walk or drive to an ATM or branch.
Student credit cards
Juniors and seniors can prepare for independent life after college by laying the groundwork for a good credit score. Young adults can usually obtain a starter credit card with the help of an adult co-signer, or parents may be willing to add the student as an authorized user on their cards.
Provide your college student with a manageable credit limit — that can double as an emergency fund — and teach the importance of on-time card payments, which will reflect well on his or her credit file. While the co-signer or primary cardholder is ultimately responsible for the debt, students who demonstrate responsible credit card activity over a period of time are likely to earn good marks from the credit bureaus.
Education savings accounts
The cost of education keeps going up. Parents can continue making after-tax contributions of up to $2,000 per year, per child, into Coverdell Education Savings Accounts, until the kids turn 18. When students withdraw money for qualified expenses such as tuition, room and board for full-time students, books and supplies, the distributions are tax-free.
If you have more than one scholar in the family, you should know that any assets left in the fund when your older child graduates can go to a sibling or other family member. You can typically close the ESA and transfer the distribution to another ESA, such as a sister’s account, within a certain time period, or you can change the beneficiary to another family member under the age of 30, without tax consequences.
For college students who are getting used to handling some of their own finances, having the right financial tools in place can make the transition to adulthood that much easier — and help parents rest easier too.
Jeanne Lee, NerdWallet
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