Expert Financial Advice for College Kids: Save and Pay Bills on Time

Nov. 6, 2009— -- College can be an exciting time for young people but, for many, assuming greater financial responsibility for their lives can be fraught with pitfalls.

Mellody Hobson, "Good Morning America's" financial contributor, went to the University of Chicago this week and took questions from students about loans, savings, credit cards and spending.

She also gave them tips on how to develop good financial habits.

One of her tips to students was that they start saving. While she acknowledged that students generally find it hard to save because they don't have a lot of extra money, she encouraged them to put some aside, even a little bit at a time.

"Let's say you have a job and you're making $500 a month," she said. "If you could save $50, that would be fantastic. If you can save $25, it's still great. All you're trying to do is get into the habit of saving."

For one student majoring in economics, Hobson said the young woman ideally should have three months' worth of living expenses set aside. But Hobson acknowledged that this could be "a pretty aggressive goal right off the bat."

In cases such as this, Hobson said, students should carefully review their budgets and consider not purchasing non-essential items.

Possessing a credit card may be important for establishing credit in the student's name and for covering expenses in an emergency but it is easy for students, who generally aren't financially disciplined, to rack up a lot of debt with high interest rates if they get multiple cards.

The average student graduates with about $4,000 in credit card debt, she said.

Hobson said she has always believed that "you only need one credit card."

Some cards are worse than others, she said.

"Store cards have the highest interest rates of them all," she said. "If credit card debt in general is bad, store cards are the absolute worst debt that you could have."