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) -- It's time for high school graduates to go off to college, moving away from home for the first time. As parents give last-minute lessons about independence, money management should be an important part of these discussions.

It is critical that the prospective college student know about budgeting money, staying out of debt and building a good credit score. This is also the time to talk with your college-age child about the payment plan for college tuition. College loans have become a major burden for millions of Americans, dragging students deep into debt before they even get started in the workplace. College students in the class of 2010 who took out loans to fund their college education owed an average of $25,250, according to a report from the Institute of College Access and Success.

Getting started

Parents should make a money management plan with their college-bound child. The plan should include how and when you will send money as well as how your child will pay the bills. Before they leave home, decide who will pay for the entertainment and incidental expenses.

Go over the basics of a checking account: making a deposit, writing a check, checking the available balance, using a debit card, balancing a checkbook, overdrafts, bounced checks and insufficient funds.

Payment options for students under 21

1. Credit cards

A student under the age of 21 can get a credit card if he or she has a co-signer, or has proof of enough income to make payments.

Co-signing should only be an option if your student can use a credit card responsibly.

If the student makes a late payment, it also shows up on the co-signer's credit report. A parent should make it very clear that the student can damage the parent's credit score if he or she does not pay the credit card bill. If the student can't pay off the debt, the co-signer is responsible for the entire debt.

Before getting your child a credit card, parents should pull out their own credit card statement and use it as a teaching tool about the dangers of paying with plastic.

Start with the interest rate and show how much more a purchase will cost if it is not completely paid off at the end of the month and interest is charged.

Show how long it will take to pay off a balance if you only make the minimum payment.

Point out where to look for the due date and the consequences of a late payment (including late fee, penalty rate and a lower credit score).

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Warn about the high interest rate and fees for cash advances.

Show them how to set up payment reminders.

Explain that the credit limit is not a spending limit -- if you must carry a balance, keep it below 30% of the credit limit.

Explain which payments should not be made with a credit card.

If you carry a balance, do not charge food, clothing, entertainment and other non-emergency items. It is foolish to pay high interest rates on pizza and clothes purchases.

Before applying for any credit card, make them understand the importance of paying off the entire balance on time each month and create that good habit by the first bill. If they can't afford a payment with cash, they can't afford it with a credit card.

Finally, use your own struggles and mistakes as lessons and warnings for your children. Teach them about the consequences of missed payments, or just paying the minimum payment.

2. Debit cards

These cards are tied to checking accounts and are easy to obtain if you have an account. However, debit cards do not help build credit scores and they may not provide enough cash during an emergency. Online account alerts can notify you when the account falls below a specified balance. Fees are increasing for checking accounts and debit cards so teach your student about ATM fees, insufficient funds fees and overdraft fees.

3. Prepaid cards

Banks and credit card issuers have enthusiastically jumped into the prepaid market because there are fewer regulations and a wide variety of fees. Some prepaid cards are now presented as alternatives to checking accounts with direct deposit, bill payment and ATM withdrawal.

Prepaid cards don't charge interest rates, but the fees can quickly erode the value of the card. Good options are the American Express Prepaid Card and Chase Liquid because they have fewer fees than most prepaid cards.

4. Secured cards

Secured cards are relatively easy for anyone to get because they are secured by a prepaid deposit. They also have many fees and high interest rates so compare the terms and conditions before applying. A secured card can help build your credit score if it reports to a credit agency. However, some cards don't report to credit agencies, so call the issuer to verify. Secured cards from Orchard Bank and Public Savings Bank both report to credit agencies.

Understanding credit's long-term implications

1. Credit scores

Teach your student that credit scores are almost as important as test scores. These records start early, so the mistakes they make today will still be on their credit report years from now. Show them a copy of your own credit report and explain how much creditors know about you -- everything from late payments on rent to the available balance on a credit card. Landlords, insurance agents and employers will use credit scores for judgments, interest rates and job offers.

2. College loans

The cost of college is expensive and overwhelming. It is much easier to enroll today and worry about payment tomorrow. Since your student will be responsible for the student loan, this is the time share the overall tuition numbers and be clear about how long it will take to pay it off. The traditional repayment period for student loans is 10 years; however, payments can be stretched out to 20 or even 30 years with a greater amount of interest penalties.

--By Bill Hardekopf

Bill Hardekopf is chief executive of, which compares and rates more than 1,000 credit cards. He is the co-author of "The Credit Card Guidebook."