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So, the day you have dreaded for 18 years has come. Your sweet little baby is all grown up and heading off to college. As a parent, you have spent every single one of those worrying about your child. You have done your best to teach them right from wrong, you have taught them, at least you hope you have, about responsibility. You have given them all the tools you possibly could to go out into the world as fully functioning adults. Or have you?
It doesn’t really matter how old your child is, you are bound to worry. Will they be safe? Will they be able to find work? Will they have food to eat? Will they be able to keep a roof over their heads? There is no point in time when these worries are greater than the first time you send them out into the world on their own. They are just a baby after all, at least in your eyes. It’s only natural to worry about how they’ll manage all the pitfalls of adulthood.
When your child goes off to college they are quite literally stepping into a whole new world. There are schedules to manage, bills to pay, and a whole host of new responsibilities to juggle. When you throw in the freedom of being away from home for the first time it is easy for a young student to get lost.
They’ve spent their whole lives having Mom and Dad there to tell them what to do. It is frightening to think of what can happen when their parents are not there to make the decisions anymore.
What you need to count on is the fact that you have prepared them the best you can to make those decisions responsibly. Now is the time to sit them down and talk to them about all of the challenges they will be facing and to give them good, sound advice about how to take on those challenges. Give them the tools they need now so they can step into that brave new world better equipped and you will be sleeping a lot more soundly at night.
One of the biggest challenges your young student will be facing is credit. As students just starting out in the world, they will need credit perhaps more than they ever will in their lives. Responsible management of that credit will not only set them up for the present, but it will also help them to have a better chance at a successful future.
As they start their college life, your child will likely be bombarded with offers for a first time credit card. They are young adults after all, with a fresh clean credit history, and at least some income in one form or another. This is probably the easiest time for them to start out their credit journey. Many credit card companies will pay college campuses just to be able to set up shop so that they can market to these prime customers.
While establishing a credit history is very important for their future, getting offered a first time credit card can come with a lot of temptations. Even the most responsible young person can easily see that credit card as easy money if they don’t fully understand the responsibility that comes along with it. That is where you come in.
When you sit down with your soon-to-be freshman, it is hard to know exactly what advice to offer. Do you even know where to start when it comes to knowing what to tell your child about their first time credit card and how to manage it? Here is a short list of some of the key points you may want to talk about. You want your child to have the best shot at life, after all, and so do we.
There are going to be a lot of offers made available to them simply because they are such prime candidates. The best advice you can give is to make sure they don’t take the first offer they receive. They may not fully understand that not all credit is the same. There are a lot of different features that can make one credit card far better suited to their needs and they will want to make sure to pick that one.
Features such as interest rates, transaction fees, benefits, and rewards are all important to consider when choosing a card. While one may have a great interest rate, it could have no rewards feature. If they are planning to pay off the full balance every month that great interest rate could mean next to nothing for them while a good rewards plan could help them with many other life costs or could even put cash right back into their pockets. Encourage them to compare credit cards online to get an idea of what the best ones are.
Having a good understanding of how their card works can save them a lot of money in hidden fees. There is an endless list of potential hidden fees involved with any credit card and it is important to be aware of what they are. Balance protection, balance transfer fees, cash advance fees, and late payment fees are just a few of the possible pitfalls they could fall into. It is important that they are aware of all of the hidden fees so they don’t lose their valuable savings.
There will also probably be a lot of enticing “introductory offers” made to them. While these offers may sound great on the surface, they may be hiding a nasty surprise when the offer period runs out. Not all companies will use such nasty tactics, but some will. That is why it is so important for them to read all of the small print before they sign up for their first time credit card.
It might be a good idea to sit them down with an interest rate calculator to show them how much their credit card purchases can add up if they allow their balance to sit. Most young people might not be fully aware of just how interest can accrue until they see the numbers sitting in front of them. There are a variety of good interest calculators online that you can use to help with this.
Have your student calculate the cost of some of his or her favorite purchases and then have them calculate the cost after one month of holding that balance on their card. This can be a great visual to show them just how fast debt can accumulate. You can do the same with cash advance rates too to drive home the message about responsible credit card use.
This may be common sense, but it is easy for a young person to see that credit limit as free money if they have never faced the harsh reality of carrying debt. It is very important to teach them that the money they spend on credit is real money that they will have to pay back. Having a well planned out budget and sticking to it is one of the best lessons you will ever teach them.
Whether it be managing their first time credit card or keeping a budget for any of their expenses, they will find knowing how to budget will save them a lot of stress in the future. “Never spend more than you can afford” is a mantra they can never hear enough because it is a hard-learned yet vital lesson. Have them practice drawing out a monthly budget including credit expenses and payments. Then maybe throw in a reward for actually being able to stick to it.
Maybe even have them practice by helping you balance out your own budget. This might have two advantages. It could not only give them hands-on practice with real-life budgeting, but it could also give you a little extra discipline with balancing your own budget.
Another obvious but sometimes hard to follow a piece of advice is to pay off the credit card monthly. A first time credit card may be a great tool for building a good credit history, but if you aren’t paying it off every month it can easily have the opposite effect. This is where having a budget and keeping to it is helpful. The reality though, is that this isn’t always possible.
It is important to teach them the importance of at least paying the minimum payment every month if they can’t pay the full balance. Paying more than the minimum payment is even better and will help pay off that credit card debt even faster. Missed or late payments are a credit rating killer and can cause many problems later on when you want to buy a home or take out a small business loan.
It is so important that they understand not to go over their credit limit. This can easily happen if they aren’t paying off their balance monthly and fees are being added. When these fees bring their balance over the limit, they could be charged huge over-limit fees that are better avoided. It can be tempting for them to max out their cards, especially if there is something they really want. Sit down and show them how expensive that purchase becomes once you add an over-limit fee.
It wouldn’t hurt to teach them about the dangers of credit limit increases too. After a few months of good behavior, they are likely to get a credit limit increase and that can get them very excited if they forget that money needs to be paid back. This would be a good time to reinforce the lesson about budgeting and maybe even have them notify the credit card company that they don’t want any credit increases. It may mean a little less credit to play with but it can be a big help in keeping their debt low.
Cash advances are a common temptation for students when they get their first time credit card. Whether it be to put some cash into their bank account or a little cash for a late-night pizza run, a cash advance can seem harmless enough to a student who doesn’t really understand how their card works. Make sure they are aware of just how expensive those advances can get.
It is so important to teach them to keep a close eye on their monthly statements. Errors are not uncommon and if they aren’t keeping an eye on it, they could be missing some major costs that could easily be avoided. No one is perfect, and your credit card company is no exception.
The credit card companies are always happy to correct any errors though if your son or daughter is watching their monthly statements and reporting any errors. This is also a great way to make sure they aren’t the victim of credit card fraud as well.
As your child steps into the adult world for the first time, they can be naive to the realities of just how cruel the world can be. It is important to teach them the importance of keeping their credit card information safe from scammers who are more than willing to take advantage of a trusting student with a shiny new credit card. Make sure they realize the dangers of sharing their credit card information with strangers and especially on the internet. They should know how to identify a secure site and be sure not to use their credit card on any site that is not secured.
With all of the competition amongst credit card companies to get those fresh new student customers, they need to entice them to sign up with great offers. Many of these companies will be offering a tempting 0% interest rate in order to get your child’s business. This is when it is important to encourage them to look deeper. While those 0% offers seem great, they need to be aware that it is likely to be only a temporary rate. Make sure they read the fine print to see what the rate will be after the initial period is over and make their decision based on THAT rate.
If you have offered your young student all of these helpful bits of advice about getting and using their first time credit card, you will have given them a great head start for their future credit health. They may not always listen but, as a parent, sometimes all you can do is give them advice and hope they use it. Making mistakes is part of growing up, but a well-taught young adult is far less likely to make as many of them.
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