Growing up is tough enough without the worries of your financial future, so Money101  is here for you. E-mail us your questions and let us take off some of the pressure.


Between the plethora of iPhone apps that help budget your lifestyle, and free access to Web-based financial literacy programs, there is no excuse for college students to be reckless and ignorant with their personal-finance habits.

College is the perfect opportunity for students to take hold of their finances and establish smart spending habits that will follow them into the real world of paychecks and mortgage payments.  

“Managing one’s finances is a necessary life skill and can be very empowering if done effectively,” says Bonnie Kirchner, author of Who Can You Trust With Your Money?, Get the Help You Need Now And Avoid Dishonest Investors. “The alternative is letting money manage you by living paycheck to paycheck or worse, building up uncontrollable debt.”

But being smart about money is easier said than done. Here are eight common misconceptions that college kids have about money and how they spend it.

I Don’t Need a Budget 

Keeping tabs on your expenditures compared to your income makes it easier to keep your spending in check. You won’t know where your money (or lack thereof) is unless you track it and stay within your budget.

You don’t need an overly-complicated spreadsheet or purchase software to stay on top on your spending habits. With Web sites like, a budget can tied to your credit or debit card to track expenses and pinpoint wasteful spending.

“Your own bank has software that will let you set up your own budget the way you do online banking,” says Kimberly Palmer, author of Generation Earn: The Young Professionals Guide to Spending, Investing, and Giving Back. “If you use a credit or a debit card, you can log in, press a few buttons, and you have a whole spending analysis at your fingertips.”

All Credit is Bad

While you certainly don’t want to go overboard with a credit card and rack up a bunch of debt, you should not be afraid of creating a responsible, well-maintained history with lenders. A solid credit history will be necessary later on in life when you are looking to take out larger loans for grad school, a car or a house.

“Some people avoid all debt like it's the plague so they avoid credit cards altogether [or] any sort of loan,” says Palmer. “The problem with that is that people don't have any sort of credit history when they are trying to either one day take out an auto loan or take out a mortgage.”

I Don’t Need to Worry About my Co-Signer’s Credit

The new credit card laws require anyone under the age of 21 have a co-signer with an established credit record in order to get a credit card.

 The co-signer provides the security and assumes financial responsibility if you default on payments. If you make late payments or continue to make purchases you cannot afford, that negative activity will affect both people’s financial futures. 

“In the event something goes wrong, [a co signer] will have to pay the money back and/or tarnish their credit history which may in turn affect their ability to borrow in the future,” explains  Kirchner.

Removing your name from a co-sign agreement isn’t as simple as you might think, warns Palmer.

“This actually even happens with married couples; even if you get divorced, it's really hard to separate your accounts. “Lenders don't really care what your relationship situation is-- they just see you as a joint [account] no matter what.”

Student Loans are Easy to Pay Off

Because it seems as if everyone has student loans, college graduates tend to think making payments after graduation will be a piece of cake.

 “So many kids assume that they will be making money hand over fist once they have their diploma in hand so whatever is borrowed during their college days is inconsequential,” says Kirchner. “Unfortunately it’s not that easy.”

Students graduating right now face a tough labor market, making it hard to find a steady, well-paying job.

Palmer explains that if you have big post-graduation plans, such as buying a house, you may have to wait a few years until you get those loan balances under control

“It affects your entire lifestyle and what you can afford,” she says. “When you have hundreds of dollars that you're paying each month, it basically prohibits you from making those other purchases that are important to you.”

I Can Go Back to School Whenever I Feel Like It 

As the effects of the recession continue to hinder the job market, many graduates are considering   going back to school for a higher degree. If you do decide to return, make sure you doing it for the right reasons -- not just because it’s hard to get a job or you aren’t sure what you want to be when you grow up.

 “Many people go back to school to become a lawyer or any kind of grad school and they don't really think about the fact that that's not actually what they want to do with their life,” Palmer says. “They won't really be happy and they're stuck with all this debt. They don't want to use the degree that they've earned.”

There’s Plenty of Time to Save 

Without major financial responsibilities like a mortgages or children, your college days are the perfect time to invest in your future.

Start saving as early as possible to avoid playing catch up when retirement is around the corner.

“The best way to measure savings behavior is by looking at 401(k) “savings behavior” by age groups,” says Jane White, president of Retirement Solutions and author of America: Welcome to the Poorhouse. “According to Vanguard Group’s How America Saves 2009, only 31% of employees under age 25 save for retirement, compared to 61% for those between 25 and 34.”

Getting a head start now will not only make retiring more realistic, it also takes money you may have spent foolishly and puts it in a place that’s harder to access.

My Parents were Frivolous, so I Can be Too

Kids learn a lot by watching their parents, and the baby boomer generation is known for extravagant spending and living beyond their means. Growing up in a household where money was carelessly thrown around may instill bad financial habits.

As a recent graduate trying to keep up with student-loan payments and new monetary responsibilities, you should be as frugal as you can.

“It’s the need to dump the mindset that you need to keep getting the latest gadget to ‘keep up with the Joneses’” says White.

What I put on Social-Media Sites Can’t Possibly Affect my Finances

While questionable content and pictures are certainly a concern for your image and professional future, you should also keep your guard up on social-media sites for financial reasons. Hackers have adapted to use seemingly harmless personal information for fraudulent credit card use.

“Because young people share more information about themselves on Facebook, they are more vulnerable to identity theft,” explains White. “If kids share information such as their zip code or date of birth, this info can be used to access their credit line.”

You may want to up the security on your privacy settings—it is way smarter to be safe than sorry. You should also keep in mind that hackers use other scams on the internet and even through cell phones.

 “Among the common schemes [is] phishing, in which e-mails direct a victim to fraudulent Web sites that mimic banks or “smishing” in which texts bait a victim to download spyware,” says White.