As you get ready to send your children off to college, do you give them a
checking account, a credit card, a debit card or all of the above? How do
you get them started on the right track in learning to be financially
responsible?
It is never too early to educate your children on how to manage their
finances, and it is really critical that they gain a solid understanding
early in their college experience. Our colleges and universities do a
great job of teaching students how to make money but never really get
around to teaching them how to manage money and credit. This means that it
is really up to the parents to fulfill this need. Parents are, in fact,
the most important source of financial education. This is primarily
through the example they set for their children.
When you start discussions with your children, you send a very positive
message to them. This message is that you see them as mature, responsible
and ready to deal with important financial decisions. Here are some
tips from College Parents of America to start your conversation with your
college students:
College
Parents of America
1. Approach the discussion with a
positive attitude.
2. Set a tone of confidence, openness and trust.
3. Laughter always helps. Lighten the mood with a joke.
4. Make it an equal exchange, not a lecture.
5. Ask plenty of questions, and listen
carefully to the answers.
6. Don't talk down.
7. Don't bring up old financial
disagreements you may have had with your children. Think of college as an
opportunity to start with a clean slate.
8. Make sure your kids know they can always turn to you for financial
advice, information or help.
What should students know and understand about credit cards? The
best place to start is with the advantages and disadvantages of using
credit cards.
Some of the advantages are:
1. Offer protection against theft of cash.
2. Can purchase products and services you need when you need them.
3. Helpful in emergencies for things like car repairs and towing.
4. Parents may feel more comfortable knowing students have them.
5. Opportunity to learn how to manage credit responsibly.
Let’s review some disadvantages:
1. It is easy to buy beyond what you can afford.
2. Too easy to owe more than you can pay.
3. Makes impulse buying too easy.
4. Can lose sight of fact that you are spending future income.
5. Interest charges really add up if you are paying minimum payments.
What else do students need to know about credit cards? According to
the National Institute for Consumer Education, students have the following
responsibilities:
National
Institute for Consumer Education
- Keep credit cards with you or in a safe place
- Do not give your credit card number to friends
- Before signing receipts, verify for accuracy
- Destroy all carbon copies
- Keep all receipts to check against the billing statement
- Inform the credit card company immediately if you lose your credit
card
- Become familiar with the consumer credit laws that protect you
And don’t forget to pay the balance off on a monthly basis. Another
alternative for college students is the use of a debit card. Debit cards
are a great choice because the cash must be available before you can
spend. The basic difference is you save first and then spend versus a
credit card approach of spend now and pay later. They can be used at ATM
machines for cash and in many of the same ways that credit cards can be
used.
Some thoughts to keep in mind:
- Talk to your students about credit and the importance of
understanding how they spend money
- Make sure they understand what their budget is and what it covers
- Consider using the debit card rather than the credit card
- Have open discussions about the use of credit
- Work with the student to review the monthly statements
- Set a good example by using credit responsibly
Credit cards and debit cards can be useful tools for managing money.
Teach your children how to use them wisely and these lessons will stay
with them for life.
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