Helping your college student understand the values of paying with cash versus paying with credit can save both you and your student tremendous amounts of money. You can also help your college student learn how to be financially wise by talking through when it’s best to use credit, and when it’s best to use cash.

Here are some tips for working with your college student on financial lessons:

• Give your college student a crash course on credit. Print out a copy of your credit report and show your college student the significance of building a good credit history. Explain the basics – check your credit record and score annually, dispute any inaccurate information that appears on your credit report, and watch for identity theft.

• Sign your college student up for a major credit card and teach him the basics of credit card use. Again you’ll want to teach him or her through the essentials – always make payments on time, pay off as much of the balance as possible every month, don’t charge more than you can pay off each month.

• Explain how using credit – in the form of using a credit card, making rent payments, paying utilities – all build a credit history that will help your college student when he or she graduates and needs to get more credit for a house or auto loan or other credit cards. Right now your college student has a clean slate. If he or she makes all payments on time and in full, he or she will build a great credit rating and will have better credit opportunities available to him or her than if he or she is irresponsible with these first credit ventures. An important fact to drill into your college student’s head is that thirty five percent of his or her credit rating will be determined by if he or she make payments on time.

• Teach the value of using cash also. Paying with cash saves on interest charges. Calculate the interest over a year’s time on a $500 charge on a credit card, if only the minimum payment is made each month. Paying with cash means paying with money you know you have, preventing racking up huge debts without realizing it.

• Instruct your college student to not fear using a credit card, just to use it wisely. If your college student only pays cash for things and doesn’t pay rent and doesn’t have an auto loan, he or she may graduate from college with no credit history established, which is not good. Your college student may need credit when he or she graduates and needs to get an apartment, car, and new clothes for work – all while beginning to pay back those student loans.

Setting your college student up with an appreciation of both cash and credit is essential. If your college student is only eligible for the kind of credit available to 18 year old fresh out of high school – usually credit cards with fees and high interest rates – he or she will be set for a tough time. Help your student see college is the time to build a solid credit rating by using a wise balance of credit and cash.