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Give your child credit, and education

CBS MarketWatch

NEW YORK -- Before your child leaves for college, impart some wisdom and information about the basics of credit.

Credit-card companies inundate students with offers, according to Deborah McNaughton, president of Professional Credit Counselors. "The companies just see dollar signs for the future," she said. If a student gets hooked, he or she might continue to provide the credit-card company with business after graduation.

In turn, students might see a credit card as a "power card," McNaughton said. "They don't have to ask Mommy and Daddy, 'Can I use it?"' The reality of the youngster's charges doesn't set in until the bill arrives.

Teach your child to charge only what he or she can afford. Have the young adult figure out how much she or he can pay per month, and then limit charges to that amount. To keep track, "students need to write in a check registry or on an index card every time they charge something," McNaughton said.

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Even if your child is attending school on the other side of the country, you can help him or her avoid major financial mistakes. Arrange for a credit card linked to a bank account. You and your child can both fund the account, and spending is limited.

You could also set up a credit card for which you act as the primary account holder. This way, said McNaughton, you'll be the one getting the bills and controlling the expenses. Just don't go as far as co-signing a loan or credit card for your child.

When you give your child money for books, meals or fun, transfer it right to his or her bank account instead of sending cash or a check. Your child will be more likely to budget the money instead of spending it all in one swoop.

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