Q&A: Legal and Financial Issues with College Kids

Aug 2020

Dear Rick:

My 18-year-old son will be going to college next month.  Because of all the issues with COVID, we really haven’t focused on any of the financial or legal issues that we probably should.  I know in the past you have addressed some of the issues that parents should be aware of, and I’m hoping that you can tell me some that I need to be concerned with.  My son has taken some loans out for his education, but my wife and I will also be helping him substantially.

Thank you.



Dear Daniel:

You are correct; there are a number of legal and financial issues that you should address before your son heads off to school.  From a legal standpoint, the first thing that you should obtain is a medical durable power of attorney for your son.

Since your son is 18, he is a legal adult, and as parents your rights are severely diminished.  If there was a medical emergency with your son, you would not have any rights with regards to the treatment of your son and thus, you’d be forced to go to court to obtain those rights.  If, on the other hand, you had a medical durable power of attorney along with a waiver of HIPAA rights, in the case of a medical emergency, you would be able to take charge; thus, avoiding the need to go to court and get judges, courts and lawyers involved in family affairs.  Therefore, it is important to have your son execute a medical durable power of attorney as soon as possible.  With regards to these documents, you do not have to pay an attorney to draft one.  There are plenty of places you can go to get a free Michigan Medical Durable Power of Attorney, including on my website www.bloomassetmanagement.com (click Bloom University, then Forms – Legal and Tax).

Another document that you may wish to consider is a general durable power of attorney.  The medical power of attorney I mentioned deals with medical issues, while a general durable power of attorney deals with issues above and beyond medical.  The general durable power of attorney can cover financial or legal issues if your son was unable to handle those issues himself.

You should also review your son’s healthcare coverage to make sure there are no issues.  It is also a good idea to talk to your homeowner’s insurance agent to make sure your son has some liability protection when he’s going to school.  This can protect him from lost or stolen items such as his computer.

I also think it is important that you have a conversation with your son about personal finance.  Your son will need to understand how to live within a budget, and he should know what expenses he is responsible for.  If your son is not responsible and incurs debt not for things such as tuition and books, but for other things such as clothes and entertainment, it could cause problems in the future.  I constantly remind parents and college students that if the student runs into problems with debt when they are in college, it could negatively impact their ability to find a job.  Therefore, teaching fiscal responsibility to your college child is essential.  In addition, let’s not forget if you can’t live within your means when you’re young, you’ll never be able to do it when you’re old.

One last thing, I encourage you to talk to your son about credit cards and the problems they can cause.  When he goes to college, he’s going to be inundated with enticing credit card offers. It is important that your son understands that not all credit cards are the same, and he must be smart about using them, and always pay the bills on time. Unfortunately, most college kids are unaware of the fact that nothing will ruin your credit score faster than being late on your charge card payment.

Things have changed dramatically since I went to college.  When I went to college things were simple and in reality, there weren’t a lot of things you could spend money on.  Fast forward to today, the world is totally different and there are a lot more things that college kids can spend money on.  In addition, the consequences of making a financial mistake are much more severe today than they’ve ever been.  Therefore, all parents need to sit down with their college kids before they go away to school and talk to them about personal finance and money management.  Remember, you don’t have to make your child an expert on money; but rather, make sure they have an appreciation and understanding of personal finance and the consequences of not keeping your financial house in order.

Good luck!


Rick is a fee-only financial advisor.  If you would like Rick to respond to your questions, please email him at rick@bloomassetmanagement.com