Financial responsibility is a crucial part of the college experience for those attending both university online and on campus, yet some personal finance skills remain foreign to students as they prepare for college. Parents have the task of preparing their children for a new financial world and they can do that by discussing the pitfalls that come with being on their own.
Do you want your son or daughter to graduate with tens of thousands of dollars in student debt especially given the scarcity of jobs all over the world? You are their first line of defense. Don’t forget to talk to your child about the key points we lay out below before sending them off to college and even more important, remind them of these key points while theyâ€™re away. You’re never too late to teach them how to manage their money.
Don’t Rack up Debt
Instead of using a credit card to pay for a late-night pizza or a cute pair of shoes, your new college student would fare much better by saving their card for more serious, long-term expenses such as a laptop computer or textbooks. According to USA Today, studies have found that there is a better chance that they will pay the bill in full if there are fewer, more expensive items listed instead of hundreds of smaller purchases.
Credit card companies offer rewards or cash back programs to their customers but students should be aware that these cards often come with an increased interest rate or an annual fee. Locked in to this rate, students often find themselves only paying off the interest and seeing the same bill every month for years after the purchase. This negates the benefit of the reward.
Don’t Destroy your Credit Score
One simple mistake in college could affect your childâ€™s credit score many years later. For instance, if a college student has limited funds one month and decides to impulsively purchase an expensive, exotic pet tarantula instead of paying off the credit card bill, chances are the bill will snowball and accumulate interest rapidly. Missing one payment will remain on a credit score for seven years so tell your child to be careful and tread lightly, especially if they hope to purchase a home or finance a car in the months after graduation.
Everyone makes mistakes. In fact, college is the prime time for goofing up and learning from errors. Encourage your child to reflect and ask what they could have done better that day or in that situation. Drive home the point that successful people are constantly reflecting and evaluating.
Say No Thanks to the University Credit Card
Just because the card has the university logo on it doesn’t mean that itâ€™s good for your child. Some of these cards have high interest rates, customer unfriendly fees and little to no customer service. Your childâ€™s college or university is putting their logo on a card that causes your child to go deeper in to debt. Cast aside the idea that you are benefiting the school by allowing your child to get one of these cards.
Know the Terms
It is increasingly important that you and your child are fully aware of the penalties and fees they may incur by not adhering to the companyâ€™s rules. On the other hand, as long as smart personal finance skills are exercised, they will build up their financial literacy and learn some valuable lessons in the process.