By Marc C. Shaffer
The moment a high school graduate steps onto a college campus, they’re stepping into one of the most exciting, and potentially financially challenging, chapters of their life.
As a committee member of the Wabash Cannonball, I was reminded of this recently at the annual banquet, where 55 scholarships were awarded to local students heading to Kansas State University. Watching each recipient walk across the stage, their excitement practically lighting up the room, I couldn’t help but picture the day my own kids might be in their shoes. (Though at 1 and 3 years old, I still have a little time before that day arrives.)
But here’s the thing – it comes faster than you think. That’s why it’s so important to help young adults step into college with a strong financial foundation. Whether your child is weeks away from move-in day or still years out, the steps you take now can set them up for success.
Below are key things we encourage parents to consider before their child heads to campus, including conversations and preparations that can help your student become a confident steward of their money and give you both peace of mind.
- Review Your 529 Plan
If you plan to use a 529 account for tuition or other expenses, review your investment allocation to make sure it matches your student’s timeline. If the funds are not already in a target-date portfolio, you may want to shift to a more conservative allocation as the first withdrawals approach. Also, take time to review what counts as a qualified expense. It is not just tuition and books. In many cases, off-campus housing costs up to a certain amount can qualify. Expenses must be claimed in the same calendar year they are incurred. For more details on what does and does not count, see our blog post, Qualified and Non-Qualified Expenses of a 529 Plan.
- Put Key Legal Documents in Place
Once your child turns 18, you will no longer have automatic access to their medical or financial information, even in emergencies. It is wise to complete a:
- Medical Power of Attorney so you can make medical decisions if your child cannot.
- HIPAA Release so healthcare providers can share information with you.
- Financial Power of Attorney if you want the ability to help with financial matters while they are away, especially if they study abroad or attend college far from home.
We are happy to connect you with an estate planning attorney we know and trust who can prepare these simple yet important documents in a cost-effective way without the expense of a full estate plan. In simpler cases, reputable online legal document providers could be considered as an option.
- Check in With Insurance Providers
If your student is taking a car to school, make sure your auto insurance covers them in their new location. You may be eligible for a discount if they will be driving less. If they are living off-campus, renters’ insurance can be a valuable protection against losses from theft, fire, or other disasters. An umbrella policy can also be a smart and inexpensive layer of protection if your student will be driving regularly.
- Set Up Banking, Bill Payment, and Tracking Systems
Help your student open a checking account with a debit card, ideally at a bank or credit union with ATMs near campus. Link it to a savings account so they can begin learning about setting aside money for future needs. Consider setting up a few small recurring bills, such as their phone plan or a streaming service, to be paid from their account. This helps them get used to budgeting for regular expenses and monitoring their balance.
If you want extra visibility, you can be listed as a joint account owner. To make tracking easier, you can also use a financial tool like Monarch Money, which allows you to view all accounts, budgets, and spending categories in one place. We shared more about how this works in our blog post, Monarch Money: A Comprehensive Financial Tracking Tool for the Post-Mint Era.
- Create a Simple, Flexible Budget
Sit down together and list expected monthly expenses such as food, transportation, personal care, entertainment, and any recurring bills. Compare those to their income from jobs, savings, or family support. Encourage them to track spending for the first few months, then adjust their budget to reflect reality. If they consistently spend more than they bring in, talk about the difference between needs and wants and whether earning more income is an option. Building this habit early will make it easier to plan for future goals and avoid unnecessary stress. We wrote more about why this is so important in our blog post, Why Your Living Expense Worksheet is One of the Most Important Tools in Your Financial Plan.
- Introduce Credit Carefully
A credit card can be a useful tool for building a positive credit history, but it should come with clear ground rules. Options include:
- A student credit card with a low limit.
- A secured credit card that requires a deposit.
- Adding them as an authorized user on your account.
Whichever route you choose, monitor spending and use it as a teaching opportunity. Paying the balance in full each month is the goal.
- Protect Against Fraud and Identity Theft
Encourage your student to enable two-factor authentication on all financial accounts and check their credit report at least annually. If they are not planning to apply for credit soon, a credit freeze can be a great safeguard against identity theft. This step is free and easy to set up with all three major credit bureaus.
For extra oversight, consider using a tool like Carefull, which monitors accounts for suspicious transactions, late payments, and cash flow changes. While it is often used for seniors, it can also be a helpful way to support college students who are just starting to manage a limited budget. You can read more about my personal experience with it here: Safeguarding Finances: My Experience With Carefull.
- Talk About Early Retirement Savings
If your student has a part-time job, introduce the idea of retirement savings early. Some employers offer a 401(k) to part-time workers, and a Roth IRA is another great option. If you have the means, you could even match their contributions to get them started.
It can also be helpful to let them know that if there is money left over in their 529 plan, perhaps because they received scholarships, current rules allow for transferring those funds to a Roth IRA for the student, provided certain requirements are met. This can be a powerful way to jumpstart their retirement savings while making the most of unused education funds.
Sending your child to college is a huge milestone for both of you. The financial habits they build now will serve them long after graduation. You do not need to have all the answers or hand over a large sum of money. What matters most is starting the conversation, putting a few safeguards in place, and letting them learn with your guidance and support.
If you would like to walk through these steps together or set up a personalized College Transition Planning session, we would be happy to help.
Please note: At the time of publication, we found Monarch Money to be a viable money management tool. The option to create a Monarch Money account is your own and you should review all of the due diligence information available before making this decision.
The opinions expressed herein are those of certain Searcy Financial Services, Inc. personnel and are subject to change without notice. The opinions expressed are as of the date of publication and are subject to revision due to changes in the market or economic conditions, which may not necessarily come to pass. Any opinions, projections, or forward-looking statements expressed herein are solely those of the author, may differ from the views or opinions expressed by others in the firm, and are meant for general informational purposes as of the date indicated. Searcy Financial Services, Inc. is not compensated by this vendor, nor are there material conflicts of interest that would affect the given statement.