The Goal -- A Debt-Free College Graduate

Thousands of North American kids are now starting their first year of college or university. Some will be day students, while others have moved away from home.

Some will graduate with thousands of dollars in debt. And believe it or not, some students will finish college debt-free. Could they have inherited money or won a lottery? Perhaps. Or maybe -- just maybe -- they learned how to manage their finances from their parents.

To help your kids deal with the responsibility of being on campus, lay out the financial ground rules -- especially about financial aid. Help them avoid the "send cash" e-mails or that scary late-night call home: "Help! I've gotten into credit card debt and I can't get out!"

You can start by reviewing some simple money management concepts with them.

Financial Ground Rules

Make a Budget

The money that is going to be spent over the year, regardless of whether it comes from parental savings, kids' savings or student loans, needs to be allotted to cover expenses.

You'll need to sit down with your son or daughter and make some projections of their spending and put it in the form of a budget. Beyond the typical expenses, remember to include telephone and entertainment.

Together, decide on an amount of money they can spend and what it is to be used for. While you want your son or daughter to have a well-rounded experience at college, what if they want to join a club or take up a new activity that requires a cash outlay?

Have the discussion regarding who is going to pay for what, and what happens if they need some extra money to cover unexpected expenses.

Talk About Credit Card Usage

Representatives from major credit card companies regularly set up displays in student union lounges. Students over 18 don't need your permission to get one.

Of course, there are many advantages to having a credit card. If your student does get a credit card, they need advice on how to avoid the common student traps. Kids tend to equate credit cards with free money. Let them know the interest rate on overdue charges and calculate the interest charged if a monthly payment is missed.

If you feel they are able to manage their own credit card, help them assess the various features offered to make sure they get the right card for them. Or consider providing them with a credit card from your own account. Studies show that students are less likely to "binge-spend" on their parents' account.

Cash Rules!

Kids should know how to write checks, save their ATM receipts and balance their accounts. If you help them learn this valuable lifelong skill before they leave home, they are less likely to get into trouble with cash or credit when they are at college.

Using today's cash equivalents -- such as prepaid cards, debit cards and college-based "smart" cards -- will give your kids independence and emergency protection without unlimited liability.

Know Your Child

Just as kids have different communication styles, personalities and interests, so do they have different money management styles. Think really hard about how they have managed their money to date and anticipate how they will manage it while at college or university. Remember to factor in their newfound feeling of independence and freedom, as well as their access to many spending opportunities. Don't expect your first and third child to spend on the same schedule either!

Help them identify their money management style and work with them to develop the skills they will need to have a successful financial experience.