College can be a costly time for kids and parents. So how can you prepare yourself and your child to be ready for the financial challenges ahead?
On "The Early Show," Carmen Wong Ulrich, personal finance expert and author of "The Real Cost of Living," discussed ways kids can safely get off on the right foot in college.
She recommends parents and kids start out by having a non-contentious discussion about money and spending.
"Sit down with them," she said. "This isn't about yelling, no raised voices. Just lay out the expectations as to who is going to pay for what. Because think about all the expenses you're looking at. You're looking at not just tuition, room and board. You're looking at books, which can run up to almost $1,000 a semester. Meals. Who's going to pay for the cafeteria versus the pizza? Clothing. Gas. Transportation. Car insurance. The cell phone bill -- that is a big one. You want to lay out what each of you is going to be responsible for paying so that you know the next step, what you need to budget."
So if you put together a budget, how do you get your kids to stick to it through the semester?
She said, "You want to set them up, of course, with some budgeting software. You can get a lot of free online budgeting software. If you want to pay a lilt bit, of course, there's some great budgeting apps they may have more fun with and easier for them to use on their phone. Also, you want to think about where is the cash going to go? That's the thing. It's not so much saving, it's how are they going to manage their own cash?"
Should your child have their own debit card?
"It's a dangerous, slippery slope," Wong Ulrich said. "...I would love for them to have their own checking account and their own debit card, because this is going to be a vital time to teach them how to budget. And a debit card is very useful for that reason. However, I recommend not signing up for overdraft. So that if they can't swipe it, then it says, 'You have no money to swipe it.' And overdraft can be a real slippery slope for overdrafting over and over again. ... If you're afraid or they're afraid that they're not going to have the money, they're going to run out and you're nervous about that, you can link your accounts online, as long as it's the same bank, and you can transfer money if you need to in emergency. ... As long as they can't get into your funds."
To help your kids avoid credit card debt, Wong Ulrich said parents should sign up together for a low-limit credit card.
She explained, "With the CARD (law) that went through last year there's a lot less of that. If you're under 21 and a full-time student you can't even get a credit card by law. But here's the thing, not so much of a fan of that. The biggest trouble is once they graduate, they don't have any established credit. You can't them to start establishing credit right away. Here's a good way to do that. Join up, sign up together for a low-limit credit card. Want to make sure that limit is low so they can't do so much damage to get you into trouble and build their credit report. Also, you can have a secured card. If you don't want to be linked to them in any way or maybe your credit is bad, a secured card is you put down some cash, and then you get extended credit and it builds your credit and the credit line gets open and bigger and bigger as the years go by and they build their own credit."
To keep college costs down in general, students should fulfill their course load - and on-time, Wong Ulrich said.
She said, "The No. 1 way to keep college costs down is to actually graduate first. Second, to actually graduate within four years. Only 40 percent of four-year college students do that. And that's the number one way to keep the costs down."