Before you send your kids off to college you likely are planning on imparting lessons on drinking, drugs, and making sure they do their schoolwork. But what are you teaching them about finances?
College is a time when kids will be inundated with offers for student credit cards. What you teach them about money, credit and how to use it responsibly can make the difference between the best student credit card experience and a nightmare of credit debt.
One of the best ways to help your child prepare for the financial responsibilities of growing up and moving out on their own is to teach them about budgeting. You may want to make up a sample budget and show them how quickly the money they make can disappear. This would be a good time to talk about controlling spending until you know that the basics are covered as well as saving a little up for a rainy day.
When it comes to credit cards, all kids tend to know is that you swipe the piece of plastic and get what you want. You need to make sure they understand the whole process. Explain interest and the impact on their credit report if they are late on payments.
Control Spending Limits
Not all kids are responsible enough to have free reign with a credit card. If your child is one of these, you may want to limit their spending with either a low credit limit credit card, or pre-paid credit card that has to be charged with money before it can be used, so they don’t end up in deep debt.
Look for Benefits
If your child is going to get a student credit card, they may as well get one that is helpful to them. Teach them about the perks of many credit cards, such as discounts, travel perks or even cash back. If they use credit cards wisely, they can make their money go further and possibly get something back for their spending.
College is a time for a lot of new experiences and for many kids, their first steps into adulthood. As parents, it is our job to make sure they are prepared for all the things they may encounter, this includes their finances. After all, if they make a mess of their credit in their college years, it may take many years after they are out of college to clean it up and get back on a level financial playing field.