Young adults who are in—or about to go to—college are facing all-new challenges. What should you discuss to help set them up for success?
For many young adults, college represents the first step toward financial independence. It can be a stressful time as students find their footing, and parents have the opportunity to help guide their children through the challenges.
Robert J. Robes, a Senior Wealth Planner for Wells Fargo Private Bank, and Mariana Martinez, a Family Dynamics Consultant for Wells Fargo Private Bank, share the important topics that you may want to consider discussing with your young-adult college student.
1. Certain legal documents are a must-have.
Even if your college student is still your dependent, students are considered legal adults once they turn 18. According to Robes, who has a college-age daughter himself, that can create a problem in an emergency because medical providers may be unwilling to share information. That’s why, the day after his daughter turned 18, he had the following documents ready for her to sign:
- A Health Insurance Portability and Accountability Act (HIPAA) form, which lets young adults give medical providers permission to share their medical information with you or others they designate.
- A financial durable power of attorney, which lets your college student name someone to make financial decisions on their behalf if your young adult becomes medically incapacitated.
- An advanced healthcare directive, which lets young adults name an agent who can make medical decisions on their behalf (sometimes called a “medical power of attorney”) in the event of incapacity and gives directions for the care they want to receive in different situations.
From his personal and professional experience, Robes recommends that every 18-year-old have those documents in place, especially if they are leaving home to go to college. Because these are all legal documents, your college student should work with an attorney to complete these documents and to gain a full understanding of the impact of the documents.
“These documents can allow you to get information about your child’s condition and make critical medical decisions about their care,” Robes says.
2. Budgeting and managing money matters more than ever.
Martinez recommends discussing what your child will be financially responsible for as well as what you will cover regarding college-related expenses. Once those expectations are clear, you can help with creating a budget that includes differentiating between needs and wants, and show your child how to set aside money for each.
If you’re giving your child an allowance during college, consider asking them to track all spending. At the end of the month, talk about how the money was spent and what lessons were learned, Martinez suggests.
“It should be a conversation that includes learning from any mistakes when it comes to spending and saving money,” she says. “You are there to offer guidance. If your student is running out of money, it may be time to talk about a part-time job.”
Robes also recommends getting your student a credit card at age 18, to start to build a credit history and get some experience managing debt. Encourage your young adult to use it for small purchases and pay them off each month. Consider sharing online resources to help them learn more about improving their credit, like Path to Credit offered by Wells Fargo Bank.
3. Have candid conversations.
Pursuing higher education and moving out can present personal challenges as well. Often, this is the first time children live on their own, and learning self-sufficiency can come with hard lessons. While it’s normal for young adults to feel disheartened or overwhelmed at times, encourage them to try to maintain a positive outlook—and try to focus on opportunities that might exist instead.
Robes says, “It’s important to help young adults understand that life doesn’t always go the way you planned. Let your children know that sometimes you have to adapt. The way you deal with and rebound from the unexpected can shape your character for the rest of your life,” Robes says.
Remember that it’s important to listen and to lead by example, says Martinez. “You may want to share times in your life where you were able to successfully adapt to unexpected events. Don’t let them lose sight of the opportunities that are available right now,” she says. “Sometimes the potential is hidden, but in my view, crisis always leads to opportunity.”
4. Growth happens outside your comfort zone.
Remind your student that college is a great time to try new things, whether it’s leading a student organization, getting to know different people, or launching a side gig.
For now, some of these opportunities may look different than expected due to the pandemic, but they are still worth exploring. For example, Martinez and Robes say you could discuss the chances to learn new online skills, find virtual internships, or volunteer in the community.
“The result could be tremendously rewarding,” Robes says. Martinez’s college-age daughter was worried that she wouldn’t be able to get a job due to the economic slowdown, so she took advantage of extra time at home to study for the LSAT, which is the entrance exam she will need to do well on to be accepted to law school.
Wells Fargo & Company and its affiliates do not provide legal or tax advice. Please consult your legal and/or tax advisors to determine how this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your tax return is filed.
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