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A fresh group of students will head to college this fall, and the consumer finance classes they took in high school might not be enough to prevent them from making some serious financial mistakes.

For Kristen Greene, a recent graduate of the University of South Carolina, the temptation of credit card freebies was too much. During her freshman year, companies were on campus hawking T-shirts, sunglasses, and phone cards in exchange for signing up for a credit card. Greene couldn't resist and signed up for "at least five" credit cards, not realizing the hassle they would cause her later.

"I was just signing up for credit cards left and right so I could get the free stuff," she recalls.

Greene knew using plastic could put her into debt, so she planned to cut up the credit cards when they arrived. Then she found out that could lead to some long-term black marks on her credit report. So she spent hours on the phone canceling the cards.

"It was a free T-shirt," she says. "I had no idea it would have so many consequences."

Credit cards aren't the only financial problems students run into during college. Banking, spending, and debt also need to be managed. Indeed, talking frankly with your kids about money can prevent many potential financial disasters.

Spending and Budgeting

College is full of temptations -- parties, student activities, weekend trips, and overspending. The best way to avoid overspending is to have a solid budget. Updating the budget throughout school also will help teach students flexibility.

"I like to spend way too much," admits Megan Singleton, a recent graduate of Virginia Commonwealth University in Richmond, Va. "If I have money, it burns a hole in my pocket."

Singleton estimates she spent about 70 percent of her money during college on groceries, parties, and going out to eat.

"That's something that you want to caution them about," says Marie O'Malley, vice president of marketing at Nellie Mae Corp., a loan provider in Braintree, Mass., which helps educate students about finances. "They don't often know how much they spend!"

Luckily, budgeting is a simple process.

"A sheet of notepaper is a great place to start," she says.

O'Malley suggests students and their parents estimate real costs by listing how much the student already spends before he or she leaves for college. These expenses then should be categorized so parents and students can talk about where the money will come from.

"The best way for a student to get the hang of it is to practice," O'Malley adds.

John Dietrich, co-owner of Dog and Pony Shows L.L.C., a Chicago-based company that gives presentations on campuses about money management, says most students and parents forget to budget -- or underbudget -- for transportation expenses such as car insurance, parking fees, gas, and car repairs and service. Activity fees from the university and student organizations also get overlooked, along with laundry expenses, extra food, and clothing.

Dietrich recommends updating the budget each month during a student's freshman year. Students should save all their receipts in a box or a drawer for their first month, and at the end of the month, expenses should be separated into categories.

"That [gives you] a really good idea of what your needs are going forward," he says.

Aside from the early credit card fiasco, Greene managed to stick to a budget for the remainder of her college career. Her father, a retired Marine, automatically transferred a set amount to her checking account each month. Greene used that money to pay her rent and bills and was responsible for earning her own "fun money" for entertainment and shopping.

"I'm kind of weird in that I will be the biggest cheapskate and refuse to go out to eat with people, but then I'll go and pay $100 for some ridiculous pair of something," she says. "But I don't do both, and it's always after my bills are paid."

Who's Going to Pay?

Good communication is key when parents and their children start planning for school. There are many ways to finance a college education, including student loans, financial aid, and scholarships. Each of these methods offers a valuable entry point to setting up a partnership with your child and helping to decide who will pay for what. A student should know exactly how much college is going to cost, including room and board, transportation, books, and other expenses.

"The student has to participate in the process," says O'Malley. "Even if parents have planned to pay for the whole thing...it sort of becomes a joint venture between the parent and the student."

Even if your child isn't going to college this fall, there's no better time than now to start talking with them about the future.

"There is a whole planning cycle in that last year or two before the child goes off to college," O'Malley adds.

Don Silver, author of The Generation Y Money Book (Adams-Hall Publishing, 2000) believes students should help finance some of their college education.

"They should understand what [their] parents are giving up," he says, adding that a vested interest in paying for a class can affect the way a student studies. "It's harder to cut class when you've paid for part of that class."

Silver recommends parents take it a step further and explain to their kids how they spend their money each month by showing them what they pay for utilities, groceries, gas, car payments, and rent. That way, he says, students will understand their parent's financial situation, which will help them "have more of an idea what the real world is like."

Dietrich takes it a step further and suggests parents involve their kids in planning whenever they make major purchases.

"When parents are paying bills or shopping for a cars or anything that's a large financial matter, try to incorporate the kids into it so they can understand the thinking behind it," he says.

This type of understanding can be crucial in avoiding financial blunders during the college years. Dietrich says his experience has been that the more expensive the college, the less students tend to know about money. He describes one student who went to a top-notch school and bought all his books with his debit card -- without any money in his checking account. The student thought the debit card acted as a credit card, and his blunder cost him astronomical sums in overdraft fees.

"That's how basic and how scary these things [can] get," Dietrich says.

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