You’ve kissed your little princess goodbye and sent her off to college this year.  She was top of her graduating class, a star athlete, and is the smartest “kid” you know – you are so proud.  You’ve supported her financially for the last 18 years and now she’s out in the “real world”.

Here are a few financial pitfalls you should make her aware of before it’s too late:

1. The Credit Card Trap

I signed up for my first credit card not because I needed or wanted one, but because if I did, they would give me a free t-shirt that said “College” on it.  A credit card for a t-shirt – a heck of a deal!  I signed up for a second one because a friend of mine was doing a fundraiser for his fraternity and just needed to get a certain number of people signed up.  I was hesitant to sign up for this one, but his explanation was, “You don’t actually have to use it, so what’s the big deal?”

Here’s the big deal – putting credit in the hands of an irresponsible 18-year old with limited income sources can be a disaster.  Yes, it is possible that the card could be used responsibly and help them build up their credit history.  The more likely scenario is that they will start using the credit card to supplement their income when they don’t have the money to buy a new outfit for the weekend or book that spring break trip to Cancun.  Educate your kids on credit cards, interest rates and how they work.  Encourage them to talk to you about it.

2. Financial “Independence”

Many high school grads have never had to manage their money on their own before.  They may not know how to make their student loan or scholarship money last a full semester or how to make their “allowance” last a full week or month.  If they’ve never had to pay their own bills before, they may not remember when they are due each month or how much they will need for the bills before they can spend money on other things.  There will probably be some trial and error here, which will be a good learning experience overall.

If you have to bail them out once or twice, fine, but make sure you are taking advantage of a learning opportunity.  If they keep getting in trouble with cash flow, you are really going to have to teach them what to do and then let them “fail” and suffer a bit.  If you keep bailing them out, they’ll never learn to figure things out on their own and they won’t make it in the adult world.  You don’t want to be supplementing their income well into their 40’s!  Teach them good money management habits now and they will be sure to pay off.

3. Establishing a Monthly Burn Rate:

Work with your student to figure out how much they need each month for rent, bills, meal plans, fraternity or sorority dues, entertainment, etc.  Show them how much “fun money” they have each month after all the bills are paid so they know that they cannot exceed that amount.  Help them create a schedule or reminders for when all their fixed bills are due so that they have money available when they need it.

4. Student Loans are no Joke

Loans are not free!  If your student qualifies for assistance, they may actually be offered large sums each semester.  Make sure you review their expenses with them and help them decide how much aid they actually need.  Loans do have to be paid back at some point and student loans aren’t even forgiven in bankruptcy!  Encourage them to think about the future.

What is their major and what kind of career will they have?  How much income will they generate?  Will they be able to afford to make student loan payments with their career choice?  Graduating with $30k in debt and not making even that much in salary per year is a bad place to start.

If they aren’t making prudent decisions now, your student could be setting themselves up to be eating Ramen noodles and driving a used clunker well beyond their college years.  Help them navigate these common financial pitfalls so that they can start their “adult life” on the right foot.

Jamie Bosse, CFP®, RFC works with clients to help them by clarifying their goals, creating a financial plan, and taking action.   She finds it extremely rewarding to see people organize their financial lives, maximize their human capital, and get closer to their life goals.  When not working or spending time with her husband and four children; Jamie enjoys writing.  Talk with Jamie if are ready to build an emergency fund at and 913-345-1881.