When it comes to managing money students headed to college this fall face a new financial landscape . Not only that families are now on a tighter budgets, but the new credit card legislation that has been passed this year has started challenging how students handle credit, and now it is needed for the parents and students to rethink how to pay expenses.
Starting in February, now it will not be possible for credit card companies to hand out cards to students under 21. Now it is must for the student to have an adult co-sign or they are required to show proof of their income. While an easy solution is to have mom or dad co-sign, although the risk is fairly high that if there would be any mismanagement or inattentiveness by the student, such as he may not pay the bill, then this will be reflected on the parent’s credit history and it will also hurt a parent’s credit score and their ability to get credit in the future.
If this is the only option, then the parents should make sure that the bill should be sent not to the student, but the parent. By doing this the can monitor the student’s expenses, and hold the student accountable to a budget.
If we think positively than this law is not such a bad idea in a way that it opens the conversation of budgeting between parent and child. Before heading off to campus, both the parent and the child should sit down and review monthly expenses. A student should have the clear idea that what is a responsible amount that he may spend on activities such as movies, campus events, equipment, food and clothes. If the parent of a new college student has an older child that is already aware of the cost of these needs, than that child can guide on what makes sense for the budget.
This process will also be greatly helpful for the student in learning how to budget. He can learn more if the parent urge the child to present documented reasons that why he need a certain expense or why he don’t want it to be reduced. Then after knowing all facts and figures the budget committee of mom and dad can make its final decision.
One final thing that I must want to tell to the students and parents that they should be aware that the credit card law mentioned above will not start until February, this means that the card companies have one last semester in which they are allowed to give students sole ownership in a card. This thing goes fine for a senior who is about to need one to enter the real world, but parents should once again advise their child of the dangers of not being responsible for debt.
College is all about learning and so a college going teenagers should also have some financial knowledge. A child who develops good money management skills at an earlier stage will probably be more successful with their finances throughout life.