As students head to college this fall, they will experience many firsts, including managing their money.
From financial aid, loan obligations and buying food and books, to opening a checking account, most college students are navigating new financial territory. And many are ill prepared for the challenge of building credit.
"A lot of kids are so worried about grades, and that's important, but your credit history follows you around a lot longer," said Peter Nigro, a professor and chair of the finance department at Bryant University.
In fact, credit reporting and scores play a big role in daily life. The process can determine the interest rates consumers are going to pay on credit cards, car loans and their mortgages — or whether they will get any loans at all.
"Credit is a good thing if you use it responsibly ," Nigro said. "It can be a disaster if you don't."
"Credit is a good thing if you use it responsibly. It can be a disaster if you don't."
Before students step foot on campus and into potential pitfalls, financial experts advise beginning with a plan, which includes a conversation between parents and their college-bound children.
Beth Kobliner, author of "Make Your Kid a Money Genius (Even If You're Not)," recommends going over the following points well ahead of orientation:
Talk numbers. At $20,000 a year for an in-state school or $45,000 at a private university, having an open discussion about the numbers can be a great wake-up call, Kobliner said. Explain the different types of loans and how they'll be paid back. One rule of thumb: Don't borrow more in four years than your expected first-year salary after graduation.
Consider the extras. At school a lot of expenses are often pre-paid, from housing and meals to entertainment. Beyond that, it's reasonable to agree on some amount of miscellaneous spending cash — as long as it's within a budget.
Open a checking account. Students should look beyond their campus bank's offerings and research and compare the best banking options. Debit cards linked to a checking account are a great way to build good habits, although that won't contribute to a credit history.
Be careful with credit. These days, in order to get a credit card, students must either put down a deposit in exchange for a secured card or get a parent or other adult to be a co-signer, which means the co-signer is also on the hook should they fall into debt. That makes it essential to keep charges to a minimum and only put on your card what you can pay off in full each month — or skip it altogether.
Set bills up for auto-pay. One late payment can have long-term repercussions to your credit history, so play it safe by paying bills automatically.
"On the Money" airs on CNBC Saturdays at 5:30 a.m. ET, or check listings for air times in local markets.