Preparing for College: Essential Financial Steps for Parents and Students

Practical financial knowledge can help foster a confident transition to higher education

College marks an exciting new chapter for students and their families, offering opportunities for learning, independence, and personal growth. However, it also brings new financial considerations for everyone. As college approaches, parents can help foster financial literacy, enabling students to understand essential topics and develop smart money habits for campus life.

At Welch & Forbes, we have experience working with many families as they prepare for this transition. While most families encounter this transition a few times, our team has helped many navigate these circumstances.

 

Create a College Spending Plan

A college spending plan is essential for helping students avoid overspending while still covering all necessary expenses. Every family’s situation varies regarding how much parents contribute versus students. Have an open discussion with your child to set clear spending expectations and decide how much oversight you will have into their expenditures.

To create a budget, analyze available resources and consider applying for scholarships or a work-study job to offset costs. Identify both fixed expenses (such as housing, meal plans, and tuition) and variable expenses (such as dining out, entertainment, school supplies, and transportation). Review and adjust the budget regularly as your child settles into their new environment and routine.

Your child should also become familiar with commonly used digital payment apps, such as Venmo and Zelle. As payment options continue to evolve, understanding how to use them safely and conveniently is an important financial skill.

Choose the Right Banking Account

Your student will need a bank account. If they don’t have one already, they will benefit from setting up a checking account, preferably one with low or no monthly fees. You can educate your child about how ATMs, checks, and debit cards work so they can use their account independently. If your child is employed while at school, they may be able to set up direct deposit to help them handle money responsibly.

Build Credit

Building credit is a crucial step for young adults starting college. Establishing good credit early can make it easier—and less costly—to rent an apartment or finance a car. It may also reduce borrowing costs over time. Banks often offer special credit cards for students – encourage your student to open one and focus on paying the balance in full and on time.

Manage Risks with Proper Insurance

As your student heads to college, seek to maintain the same insurance protections they had at home. New circumstances may require reviewing existing policies and understanding which coverages apply when your child is away at school. Consider coverage areas such as auto, health, and property insurance—renters’ insurance is sometimes required for college students.

Remember Healthcare and Legal Considerations

Parents should be prepared in case an emergency happens while their child is at college. Establishing a durable power of attorney allows you to act legally on your child’s behalf if they are in an accident or out of the country, including managing financial matters. Additionally, setting up a health care proxy or advance medical directive gives parents access to medical information and enables them to make critical medical decisions if their child becomes seriously ill or injured.

Housing Needs

Housing is another area where your child may need guidance and support. Underclassmen often live on campus and must secure housing early, while upperclassmen may transition to off-campus housing. Managing leases, cosigner requirements, upfront costs, landlords, and subleases for breaks can be complex for young adults.

Help your Student Understand Cybersecurity and Financial Fraud

College students are frequent targets for financial fraud because they are inexperienced with managing finances and often use digital platforms. Talk to your child about these risks and help them recognize phishing emails and text scams. Encourage students to develop good cybersecurity habits, such as safeguarding their financial passwords and regularly monitoring their bank and credit card accounts.

Paying for Higher Education

There are many ways to pay for higher education, and schools offer a range of financial aid packages. As you consider different colleges, compare the financial aid options available—some schools may even increase their offer if your child is a high-priority candidate.

If you or your child needs to borrow for college, begin exploring loan options early in the college search process, optimally during the fall of your child’s senior year of high school. Learn about the different types of education loans available, including federal loans and private loans. Federal loans have a fixed interest rate set annually by the federal government, while private loan rates vary and require comparison shopping. It is important for both you and your student to fully understand repayment obligations and timelines.

 

Going to college is an exciting transition, and students are better prepared when they acquire financial literacy beforehand. These essential skills foster responsibility and help students concentrate on academics and extracurricular activities. Through our wealth planning process, Welch & Forbes supports many families in this important chapter as children gain new financial independence and responsibilities. We provide guidance on long-term planning as well as short-term practical steps as college approaches. To learn more about how we can help your family, please contact us online or call our Client Development team at 617-557-9800.

Disclosure: This information is provided for educational purposes only and does not constitute investment, financial, tax, or legal advice. Consult your tax advisor or legal counsel for advice and information concerning your particular situation. Welch & Forbes, LLC is an SEC-registered investment adviser. Registration does not imply a certain level of skill or training.