Before students step foot on campus and into potential pitfalls, financial experts advise beginning with a plan, which includes a conversation between parents and their college-bound children.
Beth Kobliner, author of “Make Your Kid a Money Genius (Even If You’re Not),” recommends going over the following points well ahead of orientation:
Talk numbers. At $20,000 a year for an in-state school or $45,000 at a private university, having an open discussion about the numbers can be a great wake-up call, Kobliner said. Explain the different types of loans and how they’ll be paid back. One rule of thumb: Don’t borrow more in four years than your expected first-year salary after graduation.
Consider the extras. At school a lot of expenses are often pre-paid, from housing and meals to entertainment. Beyond that, it’s reasonable to agree on some amount of miscellaneous spending cash — as long as it’s within a budget.
Open a checking account. Students should look beyond their campus bank’s offerings and research and compare the best banking options. Debit cards linked to a checking account are a great way to build good habits, although that won’t contribute to a credit history.
Be careful with credit. These days, in order to get a credit card, students must either put down a deposit in exchange for a secured card or get a parent or other adult to be a co-signer, which means the co-signer is also on the hook should they fall into debt. That makes it essential to keep charges to a minimum and only put on your card what you can pay off in full each month — or skip it altogether.
Set bills up for auto-pay. One late payment can have long-term repercussions to your credit history, so play it safe by paying bills automatically.
“On the Money” airs on CNBC Saturdays at 5:30 a.m. ET, or check listings for air times in local markets.