College Students Need to Knows About Staying Out of Debt

College is the first taste of financial independence for many young adults. For the first time they may be paying their own bills, deciding how to spend their money and managing debt.

Unfortunately, college students don't always make the best decisions. "We've found that the average college student does not come equipped with the information they need to manage their money successfully," says Jacki Brossman-Ashorn, director of the Student Money Management Center at Sam Houston State University in Texas.

That's why it's crucial to discuss personal finance with college-bound kids. Here are seven money-management tips:

• Understand student loans. Impress on your kids that these loans are not "free money." They need to know that student loans must be paid back with interest and how large these loan payments will be. That knowledge can persuade students not to spend borrowed funds frivolously.
  
• Use debit cards, not credit cards. Talk to college students about having a debit card attached to a checking account with no overdraft protection. That way, they can spend only money they actually have. In fact, new regulations prevent students under 21 from getting a credit card unless they have a job or have their parents cosign the account. Think carefully before cosigning for your child's card -- their mistakes could hurt your credit rating.
  
• Create a budget. What's the root of most student financial problems? "It boils down to spending more than they have coming in," says Brossman-Ashorn. The solution: Establish a budget that outlines sources of income (jobs, student loans, parent contributions) and necessary monthly expenditures (cell phone bills, food, books). What's left after paying for those needs is the amount they can spend on their "wants," like concert tickets or take-out meals.
  
• Track all expenses. Financial websites and smartphone apps make it easier than ever to track cash expenditures. Students should record all their purchases, even seemingly insignificant ones. They'll see the impact that little things like a late-night pizza can have on a budget.
  
• Leave the car behind. Unless students absolutely need a car on campus, they're often better off walking, biking or using public transportation during the school year. Forgoing a car saves on gas, maintenance and campus parking fees.
  
• Eat cheaper. Campus meal plans or cooking at home (for off-campus dwellers) are much cheaper than eating out. If they have a meal plan, make sure they use it. Paying extra for a meal that could have been eaten on campus can drain spending money fast.
  
• Shop smarter. Exhort your student to stay alert for ways to save. Textbooks alone can cost about $1,000 a year, but students can slash that amount in half or more by shopping online, purchasing used books or even renting them. Student discounts also are available on everything from movie tickets to bus fare, so encourage your kids to take advantage of them.
  
• If you haven't already taught your kids the fundamentals of money management, the transition to college is a great time to start. You can instill habits that will help keep them out of money trouble while on campus – and put them on the right financial path as they enter adulthood.
  

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