Money smarts

College is a place where students have to wake themselves up for class, learn when to go home after a night of socializing and figure out how to pay for books and groceries.

For some, this new sense of freedom is all they ever wanted, while others may learn it isn't what they expected. But, all in all, this first step into adulthood is their first lesson in responsibility.

With credit card companies mailing them gimmicks or soliciting them on campus with "free" promises, students should be aware of smart financial practices and increase their literacy not only in the classroom, but in saving for the future.

Colin Meadows, financial center manager for Fifth Third Bank's University/Dean banking center, specializes in student and community development and has four years experience in retail banking management. Here's his advice on financial planning for students:

What do you think is the most common misconception that students have about financial spending?

The majority of students think that, for a lack of better words, "money grows on trees."

Many feel that if they can't afford an item, they can just put it on their credit card and pay it off later. That can create a snowball effect, with debt continuing to mount. Even with today's online and mobile banking technology, students typically don't keep track of their daily balances or their spending habits, which can result in negative balances and reoccurring fees. Before they know it, they're in over their heads.

What can parents do to educate their children about making financial decisions before they go off to college?

Don't keep finances a secret. Take time to share your financial experiences with your children. Make them aware of the importance of credit scores, balancing a checkbook and creating a savings plan.

When should you start talking to your kids about financial planning?

It is never too early. Teaching children the value of money and the importance of saving is a lesson that will help them for the rest of their lives. Whether you start them out with a piggy bank, an allowance or their own savings account, you can plant the seeds of fundamental financial planning before they even get to kindergarten.

What do you think is the most common credit card scam students fall for?

Students often sign up for credit cards just for the "offer" – and that can prompt them to get too many cards. While there's nothing inherently wrong with giveaways, it's important to fully understand the terms and conditions that apply, as well as the effect that multiple cards can have on your credit report. Having two credit cards with balances less than 30 percent of the cards' available credit lines can actually help improve your scores. However, applying for too many cards within a two-year time frame will have the opposite effect, due to credit inquiries.

-What can students do now to make better financial decisions for their future?

Map out your "needs" vs. your "wants" and create a daily budget for both. Then discipline yourself to stick to the plan.

If a student is already in debt, how would you advise them to get back on track?

Start by paying the small debts off first. This gives you a sense of victory and motivates you to pay back the rest.

Do you think a parent's spending habits and attitudes affect their kid's spending habits and attitudes when they become financially independent?

Parents and guardians must lead by example. Kids tend to mirror their parents' habits and attitudes for many things, especially finances. If the parent is financially literate, hopefully, their children will be, too. Fifth Third Bank offers resources for parents to teach their children how to be financially healthy. From a minor savings account to tips on how to talk to your kids about the economy, we can provide you with the tools you need to begin instilling solid financial values early on.

Why do you think credit card debt is on the rise?

Credit card debt is on the rise for several reasons. In my opinion, financial education regarding the effect that debt can have on students' futures might encourage good spending habits from the beginning. They need to understand that credit cards are meant for establishing good credit behavior – not going on a shopping spree that they can't afford to repay. Banks, such as Fifth Third, have many resources and tools available to help students understand how to manage debt and provide guidance for their particular situation.

What's a good interest rate on a credit card?

Interest rates differ across the board. Find a product that you are comfortable with and that best suits your needs. If you're unsure about a rate or the terms of the credit card, consult an advisor at your bank.

When should students use a credit card and how many are too many?

Students should avoid using credit cards for day-to-day purchases, unless they are disciplined enough to pay them off every month. They should never use a credit card to purchase something they cannot afford. Most credit card monitoring/tutoring websites recommend at least two open credit cards at all times. This gives a clear picture to lenders whether or not the individual has good borrowing practices or not.

What is the No. 1 thing students should know about money management so they can avoid debt and other financial problems?

Do not live beyond your means.

Is it too soon to start a retirement fund in college?

College is a great time to establish a solid financial foundation. If you can put a portion of your allocated funds into a retirement vehicle, as well as a liquid savings account to cover emergencies, this is the ideal way to save.

When should students take out student loans and when should they be paid off?

Student loans are a good way to establish credit early on. These loans should be taken out only when the student is short on tuition money after grants, scholarships, etc. Student loan interest rates vary depending on credit scores, term, etc., and are typically paid back within five years after the specified deferment time (six months to one year out of school).

Has this economy changed the way students should plan?

This economy has changed many people's spending and savings habits. Ten years ago, we had the mindset of spend now (credit) and save later. Students need to understand the importance of saving early and spending later. By following this simple advice, they'll be in good shape by the time they graduate.

Any other advice readers should know about financial planning?

I'd like to reiterate that there are three main behaviors to follow on the path of being "financially well". First: Put yourself on a savings plan. Even if it is setting up an automatic transfer from checking to savings in the amount of $20 per month, you are still practicing the behavior. Second: Pay off small debts first. By doing this you will feel a sense of triumph, and it will motivate you to continue defeating the larger debts. Third: Set up a monthly spending budget and stick to it.