Suze Orman Money Matters

According to a recent survey by MonsterTRAK, nearly half of prospective college graduates expect to spend some time back in the parental nest. More than one in five plans on making an extended stay of more than six months.

But even the 26 percent who said they plan to move out on their own faster might check in with the class of 2006: It seems that 42 percent of last year's graduates who moved back home have yet to leave.

Dependent Independence

The financial reasons for this are fairly obvious. Rents, along with housing prices, have been rising steadily, yet incomes, especially starting incomes, haven't. And the prospect of sharing a $1,500, one-bedroom apartment with two other roommates in a major city when you can still have your own room back home doesn't make sense to more and more grads.

Add in the fact that, on average, college grads leave school with nearly $3,000 in credit card debt and a boatload of student loans to pay (nearly $20,000 on average), and the prospect of living "for free" at home becomes even more enticing.

If you're a parent with a returning college grad settling back into the home nest, I have some serious advice: You need to set very clear financial rules from the get-go. There's to be no outright freeloading or open ticket for the kids to move back in without both of you agreeing to some very important ground rules. It's best for everyone.

Credit Where It's Due

I won't start by suggesting that the kids pay rent. That can make sense, but the more important first step is for you to make sure they have a grip on their debt and are making their required payments.

For you, job No. 1 is to have a serious sit-down with them about their credit card debt and student loan debt:

• Credit cards

If they're paying more than 8 percent interest, they need to make it a priority to get rid of that debt ASAP. If they can pay off the debt in just a few months by living at your place rent-free, that needs to be their goal.

If the payback is going to take more than six months, have them look into doing a balance transfer. If they somehow have a strong credit score (more on this below), they might be able to qualify for a zero-rate deal for the first year. But please make sure they understand the fine print of any transfer agreement. Often, the zero rate is only good on the transferred amount; new charges can be hit with interest of 18 percent or more.

Please don't bail out your kid by paying off the debt with no strings attached. Make that mistake and I guarantee they'll have more credit card debt within six months.

That doesn't mean you can't help: If you write the check to wipe out their debt to the credit card companies, draw up a written agreement on how they'll pay you back -- with interest, albeit less than 18 percent. A little pain goes a long way in teaching financial responsibility.

Can't bear the thought of collecting money from your kids? Then quietly deposit their payments into an interest-bearing savings account. If they manage to pay off everything to you and get their financial act together, you can present them with the account when they're ready to move out; that way, you'll have helped them save up for the security deposit on an apartment.

• Student loans

After a six-month grace period, all grads must start repaying their student loans. If they have yet to find work, they can apply for deferment. But what they can't afford to do is simply ignore their loans until they feel like they're on their feet financially and can handle the payments.

Don't let them think they can slip through the cracks. Student loan lenders will find them, and often send delinquent accounts to debt collectors. Failure to stay on time with student loan payments will cause huge credit score problems.

Help Kids Score

That brings me the next important topic: I can't tell you how many young adults are clueless about their credit scores. Many come to me after they get out of school, upset when they realize they've made every mistake in the book and have lousy credit scores.

If they're still job hunting, a weak credit score can come between them and getting hired -- more and more employers now check an applicant's credit scores (with their approval) as part of the evaluation process. A poor credit score can also impede renting an apartment; landlords don't look too kindly on applications from young adults with minimal income and lousy credit. Finally, a poor credit score also often means having to make sizable deposits for everything from cell phones to utilities.

The bottom line: Help your kids manage their credit scores by staying on top of their monthly credit card minimum payments as well as their student loans.

No Piggybacking Allowed

By the way, if you've piggybacked your kids onto your scores by signing them on as authorized users to your credit cards -- something I've recommended before -- get ready for a change this fall.

Fair Isaac, the parent of the company that calculates the FICO scores that dominate the credit industry, has decided it will no longer allow piggybacking.

This isn't because of parents abusing the practice, but because of a growing number of schemers with great credit histories who "rent" their credit cards, allowing others to be listed as authorized users without having access to the actual card account so that they can piggyback on the great record.

Ensure Their Insurance

Typically, any child who's been covered through a parent's health insurance policy loses that coverage soon after college graduation (age 22 or so). While you can apply to extend coverage through COBRA, the cost can be steep.

If your child has no preexisting conditions, encourage them to look into a short-term policy. They can shop online, and they should definitely check in with their alumni association to see what might be available through school.

Short-term plans are quite affordable, and typically provide coverage for as little as a month or up to a year or more. This is a great way for recent grads who are still job hunting, or whose insurance coverage under their new employer has yet to kick in, to protect themselves.

If you make only one point with your kids, it better be that they need health insurance coverage. It's absolutely foolish for them or you to think that their youth will protect them; plenty of young people get seriously ill. And since when do accidents only befall middle-aged, insured folks?

A Rental Account

Once all of the above is in place, you can start talking to your kids about paying rent. Can't imagine doing that to them? Use the same strategy as with the credit card bailout: Stash their rent payments in a savings account for them.

But you have to lay down the law -- that savings account is for emergencies only, or for an apartment security deposit. It's not for a reunion blowout in Cancun with the old college gang.

Also have them pay a prorated part of the utilities, if only so they can learn what it really costs to keep a home running. That way, there's a better chance that they'll budget realistically when they're on their own.

Car Talk

Finally, if your college grad has any sort of debt and is living at home rent-free or subsidized, he or she better not be driving a fancy car that was "paid for" with an expensive lease or loan. If they can't afford to live on their own, they can't afford to spend what little money they have on the worst expenditure there is, a rapidly depreciating automobile.

If they need a car, that's fine, but make sure the rules of the road are that it's an economical and safe car, not one that'll impress their friends. They can be as impressive as they want -- once they've moved out.