Answering the college cry: M-fSend money!M-F

Parents have several ways to finance kids on campus

Your Money

August 08, 2004|By Lorene Yue

The tug-of-war between parents and kids in college plays out like a game of Survivor: The one that outwits the other gets to spend the money.

When college students tap out the universal distress call, M-tsend money,M-v it ends up distressing parents, too. Rush to a childM-Fs aid too often and (despite botany courses) sheM-Fll think money grows on trees. Ignore the plea and youM-Fre branded a tyrant.

M-tLike every parent, you try to do what you can,M-v said David Mogle of St. Anne, Ill., who has two kids in college. M-tYou want to help out your kids and you want them to learn the value of a dollar. But we canM-Ft bankrupt ourselves and we canM-Ft overcompensate at the expense of our other three [children].M-v

If youM-Fre like most parents, you are no tightwad, but youM-Fre no ATM either. Chances are, youM-Fll be happy to help pay for groceries, books and the occasional midnight snack. But youM-Fll draw the line when overspending on pizza, beer, CDs and clothes leaves your kid begging for a bailout.

Here are some ideas, ranging from high-tech to no tech, to strike a balance:

Matching funds or a lumpsum distribution. Offer to match or double the amount of money your child earns at a summer job or during the school year. This way he or she takes some initiative and you can help make the pot grow faster.

You can also agree to a onetime distribution to cover an entire year of expenses. This approach can force your kid to stick to a budget, but it can also leave you susceptible to a midyear bailout if your child spends recklessly.

Gift cards. You can give your college student a gift card to a general merchandise store and specify that it be spent on everyday necessities like toothpaste and soap. But there is a risk involved. Places like Target, which has a two-part card that lets you reload the part you give to your child, [See College, 5C] and Wal-Mart also sell snacks, soda and CDs, so your kid could end up spending too much on impulse items. But the amount is limited.

Prepaid or stored value cards. When Visa launched its Visa Buxx program in August 2001, it wanted to help parents keep track of their childrenM-Fs spending habits. At first, the program, which draws money from a special account, was geared toward kids between the ages of 13 and 17. But Visa USA found that it has become a popular product among parents of college-bound kids, said Rhonda Bentz, director of public affairs for Visa USA.

Because it is not a credit card, young people canM-Ft use it to build a credit history, but they canM-Ft ruin their credit rating either. Money put into the special account does not earn interest and there are limits to how much can be in the account at a time M-y usually no more than $1,000.

Banks participating in the program may charge an annual fee of $10 to $15. In addition, there can be a menu of other charges, such as loading funds from a bank account not affiliated with the institution issuing the Visa Buxx card.

While the tracking feature sounds convenient, students could find loopholes, such as getting cash back at the grocery store. You see a $20 grocery bill when theyM-Fve actually bought a $1 pack of gum and taken the extra $19 to spend on CDs.

Credit cards. You could create a program similar to Visa Buxx by getting your student a credit card with a low credit limit. The danger of doing this is that bad behavior could blemish his credit history, and possibly yours if you had to co-sign for the card.

Remember that once your kid turns 18, she can apply for her own credit card. While that doesnM-Ft directly affect your credit history, it can put a strain on your financial resources if you have to help make the monthly payments.

Checks and debit cards. You could also disperse money into a checking account and give your student a debit card linked to that account. However, you could find those funds being sucked up by ATM user fees if your child consistently uses a machine not affiliated with the account.

Lorene Yue is a Your Money staff writer.

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