Keep College From Breaking The Bank

In many ways, college is the beginning of many a young person's financial life. For the first time, kids have the opportunity to manage their money with little guidance from Mom and Dad.

This can be great, or can turn into a financial disaster.

College can also wind up being a big financial burden for parents since most parents pay for part, or all, of the experience.

But, said financial author and radio host Dave Ramsey on The Early Show Tuesday, there are ways to keep it from being any more expensive than it has to be, namely, by avoiding four common miscues of parents and kids alike.

#1: HAVING NO FINANCIAL KNOWLEDGE

The first place parents go wrong is failing to give their kids a financial education. Nobody's going to learn how to manage money by osmosis; it's a skill just like learning to cook or writing a good term paper. Of course, the big reason many parents don't teach their kids about money is that nobody ever taught them! It's really a vicious cycle in that way.

It's never too late to teach your kids some financial sense. Freshman or senior, leaving for school next week or next year, there's still time to educate.

If you've never had a financial "how to" conversation with your child, knowing where to begin can be overwhelming. There are three topics Ramsey says all kids should know before heading off to school:
1. How to balance a checkbook
2. How to construct a simple, one-page budget
3. How and why to avoid credit cards

#2: SIGNING UP FOR CREDIT CARDS

It's no secret that college students get into a lot of trouble with credit cards. Statistics show that students are offered eight credit cards their first week at school! By the end of their freshman year, 80 percent of students have at least one card.

As Ramsey says, "Students are trading in their financial soul for a free hat."

Of course, once a student has a card, he or she uses it, and that's where the trouble begins.

Students tend to charge themselves into a frenzy, and then don't have the means to pay the bills.

Ramsey recently spoke to a college guidance counselor who told him that more and more students are actually dropping out of school so they can work and pay off credit card tabs.

Ramsey's stand on credit cards is clear: Nobody should have one, nobody should use one.

Society makes us believe we need credit cards, but we don't. Parents and students both should use debit cards, checks or cash. This insures that you're only spending money you actually have.

"Credit cards and cell phones are like badges of adulthood," Ramsey says, "and parents really have to work to explain to their kids why using a credit card is a bad thing.

The average student graduates with close to $3,000 in credit card debt; there's no reason for young adults to start off their lives in debt like that.#3 GETTING STUDENT LOANS

While most of us see credit card debt and student loan debt as completely different beasts, with one being bad and the other good, all debt is bad debt in Ramsey's eyes.

His basic message is that you should treat college like you treat everything else. You wouldn't buy a car you couldn't make payments on; you shouldn't attend a school you can't afford.

Look for alternatives to loans: Attend an in-state or local college, search out scholarships, work part-time to make ends meet. Again, starting your adult life in debt should be avoided at all costs.

#4 PARENTS FINANCING THE COLLEGE LIFESTYLE

The fourth mistake is one that lands squarely on parents' shoulders. It's one thing to pay for your child's education, but it's quite another to be paying for late-night pizza runs and beer parties.

Your child is at college to learn. Period. You can't and shouldn't drive yourself into debt financing the college lifestyle.

"Most parents don't hold their students accountable financially, because they don't hold themselves accountable," Ramsey pointed out.

He says you really need to sit down and write out a quick budget of what it's going to cost to send your student to school. Realize that the costs will be different than when your child is living at home, and have a good idea of exactly what those costs are.

Living in a dorm and signing up for the student meal plan can provide big savings. Remember, your child can learn just as much if he or she is sleeping in a dorm room as in a luxury apartment!

Ramsey's not saying your child has to live on bread and water for four years; just be aware of where the money is going and make sure it's spent wisely.