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Following the arrival of that coveted fat envelope from the college or university, parents typically sit down with their son or daughter and figure out how to pay the tuition, room and board. But your college financial planning shouldn't end there, according to Vice President for Business and Finance Kathryn Mullaney.

Mullaney says that managing the money students have to spend at college is just as important as figuring out how to pay for the education itself, and she has advice for parents and students before heading off to campus.

First, Mullaney says that it's a good idea to come up with a budget. "I suggest you separate the tuition, room, board and fees part of the cost of education from the on-campus expenditures your student will be personally responsible for day to day," she says. "This is usually an eye-opener for students. You might want to work on it together, brain-storming the kinds of costs that are going to come up such as books; local and home-bound transportation; toiletries; extra food and eating out; laundry; telephone; entertainment; and parking or vehicle registration. Most colleges' Web sites have information about what you can expect to spend for those things, so use that resource. If you know students who go there, ask for their input, too."

If you are set up to do your banking online, Mullaney says, look around that Web site as well. Many have features to help you set up budgets. So do the software programs, such as Quicken, she adds.

When it comes to setting up accounts, "It's a good idea to open a checking account for your college student at the same bank where parents have their accounts," Mullaney says. "Then you'll be able to make deposits to your son's or daughter's account from home. Banking electronically and having online access to the student's account allows you to make transfers more or less immediately, should there be a need for emergency cash."

Mullaney also says that you should do some research regarding the availability of ATMs at school. "Using a 'foreign' ATM can be costly," she notes. "Both the home bank and the bank near the college can charge you a fee. A one-dollar fee on each $10 withdrawal amounts to 20 percent! If your bank doesn't have a branch in the college town, it may be wiser for you to open an account at a different bank, so they can get at their cash without paying those fees."

In general, Mullaney notes, parents and students need to be cautious about all kinds of fees, which can add up before you know it.

"Try to find a free student checking account, if at all possible," she says, "Service fees can be very costly, and overdraft fees can be deadly. Even if a parent has to be on the account, it might be worthwhile to do so, in order to have overdraft privileges and avoid those charges. Overdraft charges range from $35 to $50, and they are sometimes levied daily."

Mullaney also has a word of advice about how to balance a checkbook, and the word is "practice."

"Sit down and practice the right way to do it, on paper or using software," Mullaney says. "When all the transactions are entered into programs like Quicken, it reconciles automatically. And if you have online banking, it's even easier. If you want to show your son or daughter how to do it on paper, use the format displayed on the reverse side of your paper statement - it really works."

Families should also consider whether or not a debit card is the right choice, Mullaney says. "A person must be 18 years old to be eligible for a debit card on a checking account," she notes. "A debit card can be used for a purchase where the student can't get to a 'home' ATM for cash, and he or she can use the card for transportation or emergencies, while avoiding those ATM fees."

If your son or daughter qualifies, Mullaney says that the debit card may be the way to go. "A debit card is much safer than a credit card, in many ways," she says. "A credit card can be a very seductive item. Consider the maturity of the student before giving them a credit card. I advise parents to give one to students and make clear that it is for emergency use only, and to define exactly what qualifies as an emergency. If you choose to do that, you will also want to track transactions very carefully, and do it online, to see what's happening before the monthly statements arrive on paper in the mail."

Finally, there is a lot of help online, especially for those unsure of how and where to start. A good one, Mullaney says, is the Nellie Mae site, www.nelliemae.com, which includes calculators and money-management advice and tools.

Posted: July 26, 2006