Have you had “the money talk” with your college-bound kids? Chances are you’ve been so busy navigating school applications, acceptance letters, and graduation parties that you haven’t yet carved out time for a heart-to-heart about financial health. But now that your kids are that much closer to adulthood—and about to be on their own for perhaps the first time—it’s more important than ever to teach about managing money and avoiding debt. 

In this article, we will take a look at some of the most common financial traps college students fall victim to, then offer advice you can pass on to your kids about creating and sticking with a budget, managing credit, and avoiding unnecessary debt during their college years (and beyond). 

Common Financial Pitfalls for College Students 

According to a recent survey of 1,000 college students, over a third said they incurred unexpected debt during their first year of school. This suggests that many college-age kids haven’t been adequately prepared to handle the responsibility of managing money on their own. Here are some of the most common money mistakes college kids make:

  • Bypassing the budget. It’s easy to assume budgeting is only necessary once you’re out in the world and earning a living. But in reality, college is one of the best times for kids to start budgeting because they don’t yet have to worry about major responsibilities like paying a mortgage or feeding a family. Unfortunately, instead of committing to a budget, many college students wind up spending way too much of their limited income on things they don’t need. 
  • Amassing credit card debt. For many new students enjoying their first real taste of freedom, the lure of a credit card can be hard to avoid. Credit card companies know what marketing tactics appeal to college students, and they don’t shy away from offering kids perks and schwag just for signing up. If your kids haven’t yet learned how credit cards really work—and how interest and fees can start adding up right after the first swipe—they could start racking up debt, fast. 
  • Misusing student loans. Like credit cards, student loan money can feel way too much like fun money. That’s why many college students wind up using their student loans to splurge on things they want, rather than the school-related costs that money is intended for. 

“If you need loans to cover tuition, fees, and supplies, and you have exhausted all other ways to pay for this and save, that is a necessary use,” says Kristen Kuchar, contributor to the financial advice website The Simple Dollar. “If you’re taking out a student loan to cover a Spring Break trip you wanted to go on with your friends or using loan money to decorate your new apartment, this is a bad use of loan money.”

A variety of factors cause students to stay in school too long, from switching majors, to not enrolling in a full course load each semester, to transferring credits from a former school to a new one (a notoriously challenging process). But the cost of those extra semesters add up over time and can lead to greater debt—especially for students who need to take out additional student loans to continue their education. 

Many new college students fall prey to some of these financial traps before they even know what hit them. Then, once they’ve realized their mistakes, they often wind up being less than honest with their parents about the extent of their debt.

Educating Your College-Bound Kids About Money and Debt 

You know the expression “an ounce of prevention equals a pound of cure”? It’s especially relevant when it comes to talking to your newly minted college freshmen about money. After all, your average student doesn’t embark on college life expecting to incur debt along the way. Rather, debt is the unfortunate by-product of poor financial habits and lack of planning. 

To help your kids avoid the stress and heartbreak of debt, it’s up to you, mom and dad, to lay the groundwork for success. With that goal in mind, here are our recommended talking points for your college-bound kids: 

  • Convince them that they need a budget. Yes, you can expect an eyeroll or two. Nevertheless, they need to understand how important budgeting is to one’s financial health. Let them know that budgeting is not just about exercising restraint—it’s also about making the most of what you have. And, to prove you’re all in this together, sit down with your kids and work with them to put together a spending plan you can all agree on. You can create your own, or use a college budget template for guidance. 

While you and your kids are preparing the budget, be crystal clear about which expenses you’ll be covering versus which ones you’d like them to manage. The specifics, of course, will depend on a number of factors, including where they’re attending school, whether or not they’re living at home, whether they’ve received financial aid or scholarship money, etc. 

Be aware that there will likely be some growing pains and hiccups as your kids adjust to budgeting, and that’s perfectly fine. The idea is to give them the tools they need to start managing their money wisely from the very beginning, before the siren’s call of new clothes, keg parties, and late-night pizza deliveries leads to overspending. 

  • Talk to them about how to spend less and earn more. Of course, budgeting isn’t just about adding up numbers on a spreadsheet. In order to succeed, your kids will need to know how to cut spending and boost income to avoid ending up in the red at the end of each month. 

Now’s the perfect opportunity to discuss ways to save money in college, such as buying textbooks used instead of new, taking advantage of student discounts and perks, and funding any extra expenses, i.e., “wants,” with a part-time job (one that won’t impinge on their studies, of course).  

  • Teach them the proper way to use credit. According to the survey of 1,000 college students we mentioned above, 40 percent of those who signed up for credit cards during their first year of college say they later regretted the decision. But owning a credit card doesn’t have to be an automatic “debt sentence.” In fact, credit cards can be very useful tools for students who know how to properly manage credit.  

If you think they can handle the responsibility, teach your kids that credit cards can be used to build a positive credit history and credit score, so long as they use them sparingly, pay their bills on time each month, keep credit utilization low, and pay in full whenever possible. 

Finally, let them know in no uncertain terms that missed payments can lead to an unending cycle of late fees and interest charges that can damage future credit opportunities, increase debt, and negatively impact their financial health for years to come. 

  • Educate them about scams and identity theft. Identity theft is a growing issue on college campuses. Scammers and identity thieves often target college students because they have what’s known as a “thin credit profile,” meaning they don’t yet have much of a credit history, which makes it harder for creditors and credit scoring agencies to pinpoint unusual activity. 

Scammers use malware and “phishing” emails to steal personal data from digital devices, and employ such tactics as “shoulder surfing” and “dumpster diving” to get their hands on students’ private information.  

Make sure your kids are aware of the dangers of identity theft and what precautions they should take to avoid being victimized. At the very least, your kids should use strong passwords, shred all documents that contain private and financial information, and only make online purchases via secure websites (hint: the URL will be preceded by https://). 

  • Encourage them to use budgeting apps and software. Meet your kids in their comfort zone by encouraging them to use technology such as budgeting apps to their advantage (hint: Quicken’s best-in-class budgeting software makes a great Christmas present or high school graduation gift). 

Helping Your Kids Stay on Track

Once your kids are firmly ensconced in college life, it’s important to keep the lines of communication open. Let them know that learning how to manage money properly is a long game, and that they’re bound to make poor financial choices from time to time. 

“When you send your freshman off to college, you’re not just ushering in a new era for your family, you’re also looking to see whether all the advice and financial training you’ve given your child really pays off,” says MoneyCrashers contributor Jacqueline Curtis. “Nobody always makes perfect financial decisions, but if you’ve laid out a solid foundation of training, your child should make it through the first year without making too many financial mistakes.”

Talking about money is never easy, but having the conversation with your kids while they’re still at home—and still a captive audience—is essential if you want them to practice responsible financial habits once they’re on their own. With any luck, the lessons you’re teaching them now will last a lifetime.