10 money-management tips for college grads

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My son graduated from college in May, and that has had me thinking about things young people should know when Mom and Dad cut the purse strings.There are the basics: living within your means, safeguarding your financial information and understanding that just because people have a lot of things doesn't mean they're rich. "It means they spend a lot of money," my children have heard me say a thousand times.But there are so many things consumers should know. With that in mind, here are 10 tips for college grads:1) Know your score: Once you borrow money from a lender that reports to the nation's three major credit bureaus -- Experian, Equifax and TransUnion -- you will have a credit report. Your credit usage and payment history will generate a credit score. The most widely used is the FICO score, developed by Fair Isaac Corp. It can be used by lenders to decide whether you'll get a loan and at what interest rate, or checked by prospective employers, landlords and insurance companies. Review your report regularly for mistakes. You can get a free copy from each of the three credit bureaus once a year at www.annualcreditreport.com. I also recommend paying $7.95 to Equifax for a genuine FICO score. To boost your score, pay down debt and always make payments on time. To learn more, go to www.myfico.com and click on "Understanding Your FICO Score."2) Use debt sparingly: Never borrow more than you can repay. Start out with one credit card and save it for emergencies. For convenience, use your debit card.3) Live frugally: "Bring your lunch to work a couple times a week," says Ken McEldowney, executive director of Consumer Action. Visit the library instead of the bookstore. Find a cheap hobby like hiking. If there's good public transportation, "maybe you don't need a car," McEldowney says. Rent when you need one. You'll save a fortune on payments, insurance, gas and repairs.4) Repay debt: You must begin repaying federal student loans six months after you stop going to school at least half time. To make sure you don't miss any bills or lose benefits -- such as interest rate reductions for on-time payments -- make sure your lender knows your address."Most people lose borrower benefits on the very first payment because they forget to submit an address change," says Mark Kantrowitz, publisher of Finaid.com.Federal student loans let students postpone payments if they can demonstrate economic hardship. However, if you default -- meaning you are more than 270 days late with a payment -- you lose these valuable options. So "call your lender before you start having trouble as opposed to afterward," Kantrowitz says.Always pay off your highest-cost debt first. If you also have credit card debt, make the minimum payment on your federal student loans, which are cheaper, and use whatever you have left to pay off your credit cards.5) Start a rainy day fund: "Start saving immediately, even if the amounts are small, and do so automatically," says Stephen Brobeck, executive director of the Consumer Federation of America. Set up an automatic monthly transfer from your checking account to savings or a money market fund. Aim to have enough to cover three to six months of expenses.This fund is to pay for emergencies such as a major car repair. The alternative is to borrow money, which will cost more. 6) Capture the match: Many companies let you contribute part of your salary to a 401(k) plan. Some employers offer a matching contribution. For example, for every dollar you put in, they might put in 50 cents up to some limit, such as 6 percent of your pay. If you leave the company, you can keep whatever you put in, plus whatever it earned. But you typically have to stay at least three years to keep the employer contribution.If you expect to stay through this vesting period, do whatever it takes -- even if it means borrowing from your parents -- to get the matching contribution. 7) Think long term: If you still have uncommitted money, contribute additional, unmatched dollars to your 401(k) plan or open an individual retirement account.8) Don't lend money to friends: "It really can complicate your friendships, and you may lose your money," says Gail Hillebrand, a senior attorney with Consumers Union.9) Be skeptical: Never believe anything a salesperson tells you without reading the contract. 10) Choose your first job wisely: Money and benefits are important. But more important are job satisfaction and advancement opportunities.Work hard at any job, Hillebrand says. "And ...get out of the office. Join an alumni association, a professional association, and sign up for committee work so people get to know you. That way if you get laid off, someone else knows about you."E-mail Kathleen Pender at kpender(at)sfchronicle.com. (Distributed by Scripps Howard News Service, www.scrippsnews.com.)