A Parent's Guide to Students and Their Credit Cards
A Credit Article Contributed by Mark Mcclelland
The Sad Statistics Regarding Students and Their Use of Credit Cards
So where did you learn about handling money...when you were a student at your parents' knee or in the school of hard knocks dealing with loads of debt from excessive use of your credit cards? And where do you think OUR kids should learn? The sad fact is that since our educational system doesn't teach sound money management, there are really only two places our kids can learn: from us - their parent's, or on the street.
And wouldn't you think that learning from someone who's experienced the hard-knocks is definitely better than letting our children suffer through the alternative.... Right? Well, lets see how we've been doing:
* we've given nearly one third of all high school students at least one credit card for their personal use, with at least half of those in the student's own name;
* we've given more than three quarters of all college and university students personal credit cards, who carry a typical balance just under $3,000, with fully ten recent carrying a balance in excess of $7,500, and,
* we've arranged it so that, last year, just under 100,000 adults aged 25 or less were required to file for bankruptcy to keep from going under.
Teaching Your Student How to Use Their Credit Card Wisely
Well, whatever it is we're doing, it's pretty clear we could be doing a better job. What to do?
1) Well, about the time our kids are in sixth grade we should be teaching - actually, at this stage it's really just talking to - our kids about banks, banking, and interest rates... nothing complicated, just what they are, why they're there, how they work, saving and borrowing... topics like that. Your goal is to make sure that by the time they're in high school they understand banking fundamentals.
2) When our students enter high school, they should be ready (at least they'll tell your they're ready) to exercise a bit more financial responsibility. Since they should already have a savings account (grade school stuff, right? ), help your son or daughter open a checking account.
They should learn how to write checks, keep track of and reconcile their balance, learn the facts about overdrafts and associated fees, etc. A debit or pre-paid card might be worth considering when they're a junior... to learn a bit of self control. The goal is to have them fully versed in money management before they're out of your sight and you're out of their mind.
3) So your kids are at college and, hopefully, they already have a good grasp of the fundamentals. This is the perfect time for them to start building a credit line of their own by applying for a student credit card under their own name, without your co-signature. After all, they should already know to not carry a balance and pay their bills on time, right?
We're done, right? Well, not quite.
Continuing Education for Students Learning to Use Credit and Credit Cards Wisely
Unfortunately for us, that's not the end of it. There are a few more teensy lessons they need, like how much debt is safe to carry, how to use debt to actually improve credit ratings, how credit ratings are established (and if you don't know yourself, that's a whole other story...), and how taxes and other kinds of activities affect credit ratings. If you're a bit shaky on some of these topics yourself, take heart... you have plenty of time, right? And, exactly how old did you say your kids were?
