Back to School: Avoid Common Money Pitfalls

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Student-money-pitfalls While I may have graduated from college with honors, as a student I failed at times in the money management department. I was the Queen of the Overdraft and was easily tempted to whip out a credit card when out with friends. Fortunately, the situation didn’t get completely out of hand, because my parents were big on financial lecturing. Advising your kids about good money habits while they’re in college is a must, since they’re not likely to get that basic education anyplace else.

From credit card debt to paying more for college than they have to, here are some common financial traps, with tips on how students (with some nudging from mom and dad) can stay ahead of the class.


The average college senior is graduating with about $4,000 in credit card debt and four credit cards in her wallet. There may be some relief for parents this fall, knowing that lenders can no longer give a credit card to anyone under the age of 21, unless they have proof of sufficient income or a co-signer (usually a parent). But that still leaves a large pool of college students who are eligible for a credit card.

• Review Basics. Research shows that just talking to college kids about credit reduces their chances of signing up for a credit card, being irresponsible and getting into major debt. Parents should explain how a credit card is not free money and only to be used for necessities – not late-night pizza. Explain that it’s critical to pay the balance on time and in full each and every month, and how mistakes made now can potentially hurt their chances of earning more credit down the road, be it for a car or home.

• Avoid Co-signing. As a parent, if your son or daughter asks you to be a co-signer, think long and hard. Be realistic. How responsible do you think your child will be with the card? If he’s been over-drafting on a debit card then that’s a red flag and a good sign he’s probably not ready for a credit card. Remember, as a co-signer, your child’s bad behavior will affect your credit records too.


The Department of Education ran a survey and found many colleges – private and public — are only graduating 30 to 50% of their full-time students in four years. For many students it’s taking longer, up to as many as six years for an undergraduate degree. Sure, it can be difficult to narrow down a major, and universities are ramping up the requirements making it more difficult to graduate in four years, but the sooner you establish a major and sign up for your courses, the more likely you can finish in four years.

• Review Course Requirements. Concerned parents should review goals with their kids, make sure they’re taking enough credits to satisfy their major on time, and that they’re working with a school counselor to ensure they’re meeting that four-year deadline. You don’t want to find out a month before graduating that (oops) they’re one class short of getting that diploma.

• Catch Up for Less. If you find out you’re behind on course requirements, a more affordable way to catch up is to take summer classes at a local community college where you can transfer the credits back to your university.


College students are prime targets of identity theft. According to the 2010 Identity Fraud Survey Report released by Javelin Strategy and Research, young adults 18-24 took the longest to detect identity theft when compared to other age groups, an average of 4 months. Here are some basic ways to protect your identity:

• Don’t give anyone your Social Security, credit card or bank account numbers unless it's absolutely necessary – and never to a marketer over the phone or on any social networking site.

• Make sure your laptop and phone are password-protected.

• Update the antivirus and spyware software on your laptop.

• Check your credit report annually for free by going to

• Review your bank statements for any weird transactions.

• Shred your credit card receipts, bank statements and any paperwork with your personal information on it.

• Report a lost wallet, missing bank card or unusual bank activity immediately.

• Don’t loan your credit card to any friends.

Farnoosh Torabi – Personal Finance Contributor, nationally recognized author, expert and television host. Her first book, You're So Money, is an acclaimed tell-all for young adults searching for financial independence. Her new book Psych Yourself Rich, gives readers the mindset and discipline to build their financial life.

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  • Anonymous

    Its nice. Thanks for sharing your experience about credit cards

  • Debt Relief

    Look at the total of income and the total expenses. The expenses probably scare you, but you can take control with some planning and possibly a little restructuring.
    The next step, ask yourself is just how bad is the situation. If it is minor, then adjust your budget accordingly. The main thing is to make the budget and adjust and then stick to it. Don’t fudge. That will put you right back to where you were. There is no instant fix. You did not get her overnight and you will not recover overnight. It takes discipline.

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