How to Prepare Your Child for the Financial Realities of Freshman Year

Each year, roughly two-thirds of high school graduates matriculate to colleges and universities in the fall following commencement, according to the National Center for Education Statistics. And though a rite of passage enjoyed by an increasing number American families each year, having children leave the nest can be a difficult experience for all involved.

Perhaps that's why 41 percent of 2014 college freshmen chose schools within 50 miles of their homes, according to a UCLA study, while only 16 percent picked institutions over 500 miles away. College students, it seems, need their parents more than they'd like to let on.

Financial support is one of the biggest areas of need. With the cost of higher education at historical levels, the appeal of free laundry service and home-cooked meals is perhaps clearer than ever. Helping out this way is great, but there are additional steps you can take to truly prepare your child for the financial realities of both college life and the real world in ways his or her chosen school likely won't.

Here's a breakdown of the most important personal finance bases to cover over the next few weeks to help students avoid falling flat when they begin their journey from the nest to campus.

1. Make sure your child gets a student credit card. Not only will the right plastic help students save on books, food and entertainment, but credit cards are also the most effective credit building tools available to young people. All credit cards report information to the major credit bureaus every month, and as long as students pay their bills on time and avoid maxing out their accounts, this regular reporting will help them build a track record of financial responsibility. This will, in turn, leave them well positioned to save on car insurance premiums, qualify for security- or finance-related jobs and have the ability to rent an apartment or lease a car after graduation.

When it comes time to choose a student credit card, the most important thing to look for is no annual fee. Cost-effective credit building should be a student's top priority at this point in their credit career, and the fact that credit card companies offer better-than-average rates and rewards to college students due to their relatively high earning potential means that students will be able to get a great deal without paying extra.

The best college student credit cards* on the market right now, according to a recent CardHub report, are the Journey Student Rewards from Capital One and the BankAmericard Cash Rewards for Students. Journey offers 1 percent cash back across all purchases as well as an additional 0.25 percent cash back when you pay your bill. BankAmericard offers 3 percent cash back on gas and 2 percent on groceries (for the first $1,500 in net spending in the two categories) as well as 1 percent cash back on all other purchases and a $100 initial bonus for spending at least $500 in the first 90 days (if you apply online). Neither charges an annual fee.

2. Enroll them in Budgeting 101. In addition to giving your child a much-needed means of accessing cash, helping them open a student checking account and providing regular deposits for basic living expenses will also force them to become better budgeters. The key is for you not to cave and replenish their coffers ahead of schedule. If you don't, they'll learn pretty quickly that they must prioritize expenses and save for the future -- not to mention the importance of minimizing account fees and avoiding overdrafts.

Coaching them through the process of choosing a checking account should also provide a lesson in comparison shopping, as each card comes with different interest rates and fees. The best options for incoming college freshmen are AmericaNet Rewards Checking and Bank of Internet Rewards Checking. Both offer APYs up to 1.5 percent and neither charges monthly or ATM withdrawal fees.

3. Figure out how much each class costs. It's important to make sure your child internalizes the value and financial ramifications of their college education. Otherwise, peer pressure and the non-educational allures of college could lead to common freshman year pitfalls such as skipping class and falling way behind in the first few weeks.

Knowing exactly how much that 8 a.m. seminar is costing you per class might not ensure that your child attends every one, but it may help them get out of bed often enough to prevent irreparable harm to their GPA and avoid forcing you to pay for the same course twice.

4. Establish expectations. Before a young person leaves for college, it's important for the family to have a conversation about exactly what the student will be expected to pay and how much financial support the parents will provide. This will give the student the context needed to budget effectively, make informed purchase decisions and strategically determine whether unpaid internships or paid part-time positions are a better career move at this point in time.

This may sound like obvious advice, but it's not uncommon for students to think they have more in their education account than they really do or for them to get saddled with student loan bills they thought their parents were going to cover.

5. Pique their curiosity in investing. Young people have an invaluable asset on their side: time. Perhaps most importantly, as far as personal finance is concerned, students have time to let compound interest work wonders. Consistently investing from an early age will help your child to retire far earlier than they would otherwise, and exploring the process may even spark their curiosity in a certain type of major or job.

So, in addition to giving your child a regular allowance for basic needs, deposit a small amount each month into a brokerage account in their name and set a no-withdrawals rule so they can't use the money for something else. Or, if you don't want live bullets flying quite yet, sign up for a stock market simulator with your child. You can also encourage them to check out various investing-related resources that many colleges and universities offer.

Hopefully, this advice will help make the transition from high school to college easier for both parents and students alike. With a topic as crucial as personal finance covered, there should be less stress and uncertainty clouding the occasion.

*Editor's note: U.S. News also ranks the Best Student Credit Cards.

Odysseas Papadimitriou is CEO of the personal finance websites CardHub and WalletHub. He previously was a senior director at Capital One.