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July 14, 2010 Wednesday 7:01 AM EST
SECTION: PERSONAL FINANCE; Chuck Jaffe
LENGTH: 933 words
HEADLINE: A financial talk before the kid heads to college
BYLINE: Chuck Jaffe, MarketWatch mailto:email@example.com.
Chuck Jaffe is a senior MarketWatch columnist. His work appears in many U.S. newspapers.
BOSTON (MarketWatch) — My oldest daughter leaves for college in a few weeks, so she is in the process of making her lists for what to bring, what to buy and what to do before she takes the next big step.
I’m making a similar list of all of the things I need to say to her, and all of the financial chores that need doing before she heads off to school.
Truth be told, almost every adult I know has some financial horror story that they lived through during their college years. In many cases, the horror only became apparent years later, when they were trying to start a family but were still paying off the excesses of college life.
Accordingly, long before my daughter started the process of picking a school, my wife and I tried to establish the ground rules — the costs we plan to pay for and the things we expect her to cover. The basic decision of who pays for what typically is based on the family’s circumstances, rather than on some magic formula.
My daughter has bought her own movie and theater tickets for years, so she’s not suddenly expecting me to pick up the tab on entertainment costs. Likewise, she knows that if the family is paying for a meal plan — and we are — it’s not our responsibility if she decides to enjoy the local burger joint. And she’s still on my cell-phone plan, though I’m still not paying for silly games or ridiculous ring tones.
Here are the three big things on my to-do list before my daughter heads for school:
1. Check with health- and dental insurance providers, to learn their rules.
Effective September 2010, as part of the health-care reform law, parents can keep children on their plan up to the age of 26. That makes it possible to use your own plan rather than using a college-sponsored plan.
Prior to the change in the law, college students often lost their coverage at age 19 (and my daughter turns 19 before her freshman year is over), or upon graduation from high school or college. The White House asked insurers to make sure there were no coverage gaps for new college students, so many companies are actually providing the extended coverage prior to the September start date, making sure that kids who go off to school in August don’t face an unpleasant surprise.
That said, having a child on your health plan may not make the most sense. Some insurers won’t allow for out of town doctor visits, or would require your student to pick a new primary-care physician in their college town, or don’t extend prescription coverage beyond your home area.
Know the rules, so that you don’t get stuck with surprise out-of-pocket expenses. Meanwhile, check with the college or university to see if it offers a plan for students, and what that protection actually covers. Compare both coverage and premiums, then let your child know what they need to consider if they have a health issue.
If your student is going to be responsible for their own medical coverage, you might suggest they find a job with benefits, although that can be an awful lot to ask of a full-time college student.
2. Check property insurance coverage.
I’ve always made my children responsible for breaking their own technology; I’m not replacing the cell phone you dropped in the toilet.
That said, I want to know which of my kid’s items might be covered on my property insurance so I can decide if renter’s insurance is worth buying. To know, I will also have to get an idea of just what items my daughter is bringing to school.
Find out if the school has a policy that covers casualty losses in the dorms. Most don’t, but some help students establish an insurance plan that covers their dorm room, a car (if they bring one) and health care.
3. Check the credit report.
Consumers are allowed one free credit report from each of the major credit bureaus every year. This is a case where a review at the beginning, middle and end of the school year makes sense. (You can get your free report online at , the official site established by the credit bureaus to comply with the law.)
With my daughter, I’m not expecting to find much there. Still, I want to know she starts with a clean record and I’d like to be aware of changes — if she comes to me for any credit counseling — over time.
The good news here is that the Credit Card Accountability, Responsibility and Disclosure (CARD) Act that went into place last year prohibits applicants younger than 21 from obtaining a credit card unless they can prove they have the financial means to pay the bills. That means they’ll need a pay stub or a bank statement; it’s not as simple as walking across the college common, and signing up with some slick salesperson giving away free t-shirts and balloons.
To begin building a credit record for your child, or to give a card that can be used for emergencies or books or whatever expenses you and your kid agree to, you will have to co-sign for a credit card.
That said, if you co-sign your child’s card, you are jointly liable and your own credit might suffer if your child doesn’t pay the bill on time. This is why some parents will get a card where the bill comes to the family home rather than the dorm room.
Still, this is the time to set clear expectations. It’s why my daughter and I need to have that talk before she heads off to school, because she needs to know that I don’t want to be on the hook for any bad decisions.
I think she knows that “I’m dying for pizza” does not constitute my idea of an emergency, but she’s a teenager, and I’m not leaving anything to chance.
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