Heading Off to College

Posted by Mike Smith :: September 3, 2007 @ 9:04 am

As a new class of freshmen head off to college, a world of opportunity awaits. So many aspects of their lives will be affected in the coming year, not the least of which will be their interaction with money. For many students, college will represent a newfound freedom of being away from home. That freedom will be accompanied by new responsibilities.

Parents might be comforted by the fact that their child is heading off to college with a shiny new credit card. It may seem like a wonderful safety blanket in case they encounter an emergency and need money. Of course, as many parents quickly learn, their definition of an emergency might be much different than their teens’. Just as in the classroom, students will learn about credit through their successes, but also through their mistakes. Using a credit card during the college years will likely set the foundation of their credit history. Whether that history is good or bad will depend on how responsibly they use their card.

We here at Lending Club understand that credit card debt can overwhelm many people, but most especially students. It can happen so quickly with the many temptations of their new world as well as the abundance of offers for new credit being pushed on students every day. Worse yet, students who put off paying down their debt until after they graduate will be in for a rude awakening. While it’s true that graduation may also lead to a new, higher paying job, the damage done by credit card debt may not be worth the wait. Many students find that the combination of credit card debt and student loans make their first few years out of college very difficult.

Students entering college this year are living in a much different world than that of their parents’ generation. Their financial lives will be influenced by newer product offerings, like online banking, P2P lending, and virtual currencies, that didn’t exist 10 years ago, let alone 30. Through gentle parental guidance and personal responsibility, students can optimize their financial future by building positively on their fresh credit history.

For example, here are some ways that parents can get things off to a good start:

1. Make sure the card amount is not too high, so that even if the card is fully utilized the level of debt will be manageable

2. Review the spending on the card monthly and discuss items as you see fit

3. If there is a balance, discuss the plan to pay it off and stick to it