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A lot of parents teach their kids about financial responsibility, like how to balance a checkbook, why it’s important to check your credit scores, how to save for a rainy day, be frugal with your money and not overspend with credit cards.

This article isn’t for them. This is a financial primer for those of you leaving home for the first time with little-to-no knowledge of how to set up checking and savings accounts, how to budget that influx of financial aid money so it lasts you all semester, and how to properly manage a credit card. Consider this your Finance 101 – your first lesson in how to adult with money.

1. Understanding What Credit Scores Are & Why They Matter

Credit scores are essentially your financial report cards. They’re looked at by credit card companies, auto and home lenders, and even landlords and utility companies. Starting out, your credit scores will be low (or not exist) because you have little or no credit history. But once you do get credit (maybe a student loan or a student credit card), handling it properly by making payments on time and keeping credit card balances low will help you build good credit. That will make getting additional credit, and maybe even your first job, a lot easier.

On the other hand, if you make late payments or skip them altogether, it can negatively impact your credit scores for up to seven years. That’s a long time to pay for youthful mistakes.

2. You Probably Need a Checking Account

If you’ve never had a checking account before, you’ll want to read up on the ways you can manage it correctly and avoid overdraft and bounced check fees. Having a checking account in college can be extremely helpful. It’s a safer place to keep your cash than in a jar, can give you flexibility in receiving direct deposits from your parents and/or financial aid and often comes with a debit card, which is easier and safer than carrying a wad of cash. Just keep in mind that you don’t want to just open an account with the first bank you come across. It’s a good idea to comparison shop.

Same goes for savings accounts. It’s a great idea to set up a savings account (if the charges aren’t going to outweigh any interest you might earn), even if you can only save a few dollars a month. Over time, those pennies can really add up.

Whether checking, savings or both, there are several important questions you should ask a bank before opening an account.

3. Why a Budget Is Your Best Financial Friend

Creating a budget is essential, particularly for students receiving student loans and financial aid. Those funds most often come in lump sums at the beginning of each semester, making it easy to feel flush with cash. With so many opportunities around campus to spend that money — decorating your dorm, eating out and going out with friends — it’s easy to run through it pretty quickly. By establishing a budget, it’s easier to see just how limited your cash flow really is and how much you’ll actually have each month to pay for the necessities. That’s not to say you can’t have fun. Entertainment should also be part of your budget — just make sure it doesn’t keep you from meeting your financial obligations.

4. The Pros & Cons of Credit Cards

Very little in your teens and early 20s feels more grownup and powerful than having a credit card — until you get into financial trouble with it.

If you’ve never had a credit card and you’re worried that you won’t manage one responsibly — that you’ll overspend or forget to make monthly payments — it might not be the right financial tool for you. Keep in mind that a debit card can be used in much the same way, but only allows you to spend the money you already have, so you won’t go into debt (though keeping your spending in check is still important). It’s important to know that using a debit card doesn’t help you build credit.

If you feel confident, though, that you won’t rack up a big balance and you’ll be able to at least make minimum monthly payments, there are credit cards designed specifically for students. Keep in mind you’ll need a co-signer or proof of enough income to qualify for a card if you’re under 21.

5. Choose the Right Roommates

If you’re going to live off campus, keep in mind that your rental payments can impact your credit scores, because if you don’t make your rent payments, the unpaid rent could end up on your credit reports as a collection account. There are also specialty tenant credit reports that future landlords may check, to see if you have late rent payments or eviction in your past. It’s a good idea to ensure you make your rent payments on time and in full.

Perhaps most importantly, it’s good to keep in mind that the people you choose to be your roommates can also impact your credit scores. If they don’t make their rent payments and your name is on the lease, it’s you who is liable for making sure it gets paid and vice versa. That’s why it’s a good idea to choose responsible roommates who can show financial ability to pay or whose parents will be footing the bill.

Remember, you’re building your future — educationally and financially. Your grades each semester will help you track your educational progress, and your credit report summary from Credit.com can help you track your financial progress by telling you how you’re doing in the five key areas that are included on your credit report and determine your credit score: payment history, debt usage, credit age, account mix and inquiries.

Image: Geber86

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