Top Spending Mistakes for College Kids

Your college kid is experiencing that first taste of freedom — which includes making independent financial decisions. For many students, that can mean learning lessons about spending the hard way. But you can help your favorite student avoid falling prey to the common financial pitfalls and get on the right track.

Free T-shirts and Frisbees and swag, oh my! Signing up for an unnecessary credit card can be all too easy when a booth is set up on campus with the promise of free giveaways. "Students should be extremely careful when agreeing to any credit card," says Andrew Schrage, co-owner of the personal finance website Money Crashers.

Financial fix: Parents can help out their kids by reviewing all the credit card paperwork for improper charges or predatory fees. According to Alan Moore of Serenity Financial Consulting, parents can also enroll their children in financial management classes at local community centers.

College is a place where you figure it all out, but for some, it could cost them. Moore says many students take courses for a few years before choosing a career and then find out those classes don't count toward their major. "This adds an additional semester or year, which can be very expensive — not only in terms of tuition but also lost wages."

Financial fix: Consider hiring an experienced career coach who can help your collegian pinpoint a solid path. "A good career coach will have a robust process for analyzing strengths and weaknesses," says Moore.

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Many campuses offer services like laundry and errand-running, which may be attractive to a college student on the go. "These services, while tempting to take advantage of, should be avoided," says Schrage. "The typical college student easily has enough time in the day to take this on, and it's important to learn how."

Financial fix: Before they leave for college, help your kids help themselves by making them independent when it comes to everyday chores. Once they're at college, make it clear they'll be responsible for these expenses on their own if they choose to indulge.

Your collegiate child may be dismayed to learn that those hefty student loan checks don't equal free cash. "Another spending mistake is using student loans as an income source," says Moore.

Financial fix: If it's realistic for your student, encourage her to get a part-time job to offset the debt. Also, Schrage says it's important to instruct college kids not to borrow more than necessary or treat loan overage checks as "an open checkbook." Make sure she's aware of the heavy interest that accompanies such loans and the length of time it will take to pay them off.

New textbooks may look great in your college kid's backpack, but they can also weigh him down financially. "Textbooks are incredibly expensive," says Moore. "A lot of students will go to the campus bookstore to buy their textbooks, not realizing there are cheaper options."

Financial fix: Moore suggests encouraging students to visit off-campus bookstores to see if they have any used copies. Online outlets are another great option for used books, where, according to Moore, "students can typically get previous edition books for pennies on the dollar compared to buying new." Book rental is also an option.

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"The best way for college students to avoid spending mistakes is to watch the add-ons they commit to," says Schrage. "A university-based debit card is also a no-no, as they're typically rife with excessive fees." Buying campus health insurance is also unneeded because, as Schrage points out, students under the age of 26 can stay on their parents' health insurance.

Financial fix: Utilize your family insurance policy. Also, before signing up for any university debit card, be sure to read the fine print.

Like it or not, your college-age kids may be experimenting with alcohol — but they may not be thinking about the financial hangover that could accompany it. "Many students have no idea how much money they're spending on drinks throughout the year," says Moore.

Financial fix: Moore suggests parents make their students cover their own entertainment expenses in order to encourage personal responsibility. "Another option is to give the student a set amount of money on the 1st of each month, with the understanding that more money isn't available if the student blows through it," he says.

Current college students aren't yet feeling the pinch of student loans, so it isn't always foremost on their minds. "The biggest myth among students regarding money is that they don't need to worry about paying back their loans until after graduation," says Schrage.

Financial fix: Parents can help their students seek a part-time job and encourage them to "sock away those funds so they're prepared when the student loans come due." You can also start a Roth IRA or money market account in your child's name with a nominal amount and encourage him to add to it.

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