Sending a child to college for the first time can be a stressful transition for any parent. Even though your child is legally an adult (or almost an adult) by the time they head out on their own, a parent's worries about health, safety, and happiness don't end at their child's 18th birthday, and sending one's child into a brand-new environment can bring on even more concerns.
But the college years aren't all gloom and doom for parents. This can be an exciting opportunity for your child to spread his or her wings for the first time and see exactly what they're capable of accomplishing on their own. To that end, there are a couple of important things for your child to know once they're responsible for their own decision-making.
Credit Cards and Student Loans
Once your child turns 18, they're legally able to take on student loan debt, sign up for a credit card, or enter a legal contract. Even if you've been careful to instill in your child a sense of financial responsibility, this newfound freedom (and the convenience of being able to get just about anything delivered to your door by simply clicking "order now") can be intoxicating. In some cases, it may make more sense to add your child as an authorized user on one of your credit cards instead of encouraging them to get their own; this allows you to oversee their spending and make sure that they're not overextending themselves.
Student loans can be another major source of debt. While many college students must take out loans to help cover the cost of attendance, as a parent, you'll want to ensure that your child understands the terms of the loan agreement and has a good idea of what their total repayment will look like after four or more years of education.
Power of Attorney
If you're concerned about being able to make decisions on your child's behalf in an emergency, you may want to ask your child to execute a power of attorney. This legal document grants you permission to stand in for your child if he or she is incapacitated in a way that prevents them from making important legal and medical decisions, such as an auto accident or serious illness.
Financial Aid and Scholarship Offers
When choosing a college, it can be tempting to go with the option that offers the most financial aid. But it's important for your child to learn to read the fine print on these offers. For instance, if a generous scholarship is contingent on maintaining a certain GPA and your child is planning to enroll in a challenging course of study, it may be more prudent to go with a school that offers a less generous but more sustainable aid package. By working with your child to evaluate these offers, you'll help them hone the tools they need to make wise financial decisions for years to come.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.