For most young adults, college is a time of learning and growth. Unfortunately, this new found freedom also comes with some times of poor judgment and mistakes. College students are quickly moving up the ranks as one of the fastest growing demographics for personal debt burdens. Endless credit card offers, tight finances and spending temptations all add up to a potential credit disaster if not monitored carefully.
Getting a credit card for use in college is not a bad idea, but one that needs to be taken into consideration. Establishing any credit, let alone good credit, is quite a chore for most people. College students are easily distracted by school and work, leading to poor money management habits that eventually lead into debt. The average college student graduates with over $5000 in credit card debt, in addition to the near $30,000 in student loan debt. Fresh into the job market, the average college graduate is already responsible for repaying $35,000 in debt on a beginner’s salary.
If your kid is in college, or about to head off to college there are a few ways you can prepare them for the upcoming world. First, take the time to show them how to create and follow a budget. Smart money management starts early and takes effort. Let them practice managing their money before they leave home. Second, help them obtain a low limit credit card that they can use for emergencies and small purchases. Assisting them in choosing a line of credit before they are out on their own can prevent them from getting into a high limit, high interest rate card that will have them locked down for years of payments. Last, keep communication honest and open. Be available to help them in a time of financial need so that they don’t turn to credit cards every chance they get. There are valuable lessons to be learned and most college students are simply not prepared to “sink or swim”.