Econ 101

For kids about to start college, there are plenty of experiences to look forward to, but for far too many students debt will also be on the horizon. And with little practical knowledge of finance, those who aren’t careful can graduate with way more than just student loans hanging over their heads.

 “Every golfer hates Tiger Woods because he started playing golf in the womb,’ says Alan Corey, author of A Million Bucks by 30. “Those pre-natal golfing lessons have obviously paid off because he started playing golf so much earlier than the competition. The same applies with finances—the earlier you start, the wealthier you are.”

But where to start? Between books, booze and snacks, most students don’t have two dimes left to rub together. “If you are going to live below the grid financially, you might as well make the suffering fun,” says Corey. “Find free concerts in parks or stage your own rock show there. Host a ramen noodle cook-off with friends that can feed a party of twenty, or have a $2 thrift-store party where everyone has to wear an entire outfit they bought for under $2 at a thrift store. I've done this, and I found such great threads that I still wear some of them even today - and get compliments.”

Looking for a more creative endeavor? “Host a drunk art gallery,” Corey recommends. “Everyone comes over, gets blasted and paints something. The next day, bring your hung-over selves and your modern art to the local flea market or garage sale, but keep the drunken aspect of it under wraps. Price them $15 - $100 each and watch the offers fly. It'll at least be enough to cover the costs of your drinks and paint for the next go around.”

But it isn’t all fun and games. Students who save are sure to have an easier time transitioning to the real world after graduation. So, unless mom and dad want to refill an empty nest, they should keep a keen eye on the way their kids spend.

“It can be a challenge for college students to manage their finances when they first head off to school, says Steve Katz, director of consumer education for TransUnion’s TrueCredit.com. “While flexing their independence, some flex their wallets too. That’s why it’s so important for parents to sit down with their kids well before the school year begins to map out a spending plan. Parents and students should determine how much they will have to spend each month, how it should be allocated and should discuss what happens if they run short on money.”

Part of that discussion includes the importance of not racking up credit card debt when they do run short on cash. Citing a survey to be released next week, Katz says, “Nearly one in four respondents left school with more than $5,000 in credit card debt. In fact, one in 10 respondents indicated they owed more than $10,000 for purchases made with credit card.”

Corey also says to avoid credit cards that come with gimmicks like free t-shirts emblazoned with a bank’s logo. “Pay cash for everything until you have graduated,” he says. “That's the definitive way to avoid both debt collectors and the fashion police.”

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