EDUCATION Setting up financial strategy gets college kids started right

Experts say a monthly allowance can help teens learn to budget.
NEW YORK (Dow Jones/AP) -- Sherry and Patrick Levy wanted to ease some of the financial burdens of their son, Nicholas, while he was in college.
So they decided to give Nicholas a debit card linked to a savings account into which they deposited $200 a month. They also gave him a charge card that he could use only for emergencies.
"At first I was worried he would blow it all in the first couple of weeks," Sherry Levy of Woodcliff Lake, N.J., said as her son gets set to begin his second year at Connecticut's University of New Haven. "But he has stuck within that budget."
Families like the Levys are finding that setting up a financial strategy with kids before they leave for college can help them manage money wisely and avoid racking up credit card debt.
One of the easiest ways to start your child's transition to financial independence is to give them an idea of what their spending needs are and how to live within a realistic budget.
Parents can start by expanding allowances in high school while giving kids more responsibility to pay for items on their own.
"If you're giving them the uneven cash flow in a monthly sum, then the student has to save it," said Judy Miller, a college-planning specialist in Alameda, Calif.
Preparation
She recommends expanding allowances to $150 for high school seniors and asking them to make that money last for the entire month. Working with a larger budget in college can sometimes be a shock to some students who were used to managing only $10 to $15 dollars a week in high school, she said.
Part of the problem is that high school kids usually spend any income they have on their "wants" not "needs," said Dara Duguay, the executive director of JumpStart Coalition for Personal Financial Literacy, a nonprofit group in Washington that promotes the teaching of personal finance in schools.
"Most parents insulate their kids from knowing what the family's expenses are. If your kids have no clue about what the utility bill is, they're going to be woefully unprepared once they go out on their own."
That's why now is a good time to create a monthly road map. Lay out the student's estimated expenses, both personal and school-related. Decide whether the student will access those funds through a checking account, a debit card or credit card.
Next, decide who will be responsible for funding the account. In some cases, the student may have to work part time to pay for personal expenses. Other parents may completely fund the account but want to be involved in deciding how the funds are spent.
Planners say that one of the most important things teens need to understand is that how they manage payments on their first credit card may affect their ability to buy a car or house, or get a job after graduation.
Young adults are one of the groups that know the least about credit scores and credit reports, according to a recent study from the Consumer Federation of America.
Still, it's important for teens to build their credit since it's often easier to open a new account while they're still in school.