Every year as college students prepare for another term, parents wonder about money and especially credit cards. MasterCard, then, conducted a survey to find out what concerns parents most and inform on how they can address these concerns.
One of the biggest concerns for parents every school year is how their college student will fare financially once they return to school. As a matter of fact, approximately 40 percent of parents fear that their kids will run out of money within the first month away from home. Overall, though, 65 percent of parents with children in college say that money is their primary concern as they send their kids away.
While this is, obviously, a major concern, parents also said that this fear relates to uncertainty as to whether or not their college-aged child truly understands money well enough to establish a solid credit history. In fact, parents fear overwhelming debt for their children the most, praising text alerts and the ability to freeze accounts, even for debit cards.
Obviously, the best way parents can feel better about their children’s college finances is to introduce them to proper money management early. By teaching them a few simple and basic strategies, it prevents the need for emergency account freezing and parental access. Besides, the sooner young people learn how to properly manage money, the sooner they will be able to make long-term financial decisions, which affect everything from buying a car or home to quality of living.
In light of this, Michael Germanovsky, lists a few starter tips for every parent of a college-age child. As founder of the Student Credit Card Education Initiative, Germanovsky knows a thing or two about adolescents and their relationship with money. His tips include:
- Help your child establish a basic budget. How much will meals cost per day? Per week? How much gas will they need for school? For work? How much will school supplies cost (including lab fees, books, etc)? How much will they need for entertainment (movies, clubs, hobbies, gym memberships, etc)? Do this before they leave so that you can agree, together, what the best budget is.
- Find a simple, low-interest, low-limit, no-annual-fee student credit card that they can use to start paying some of these bills established in your budget. Student cards are available with credit limits as low as $300, which is enough to pay a few bills or stock the refrigerator. Help them to use the card to pay for things in the budget and then pay it off every month in order to establish a credit history.
- This is a great time to teach financial responsibility by letting your college-age child start making regular credit card payments based on the budget you have established. Help them to set up automatic payments to avoid fees and other consequences and use this as a teaching tool to explain the importance of spending within their means.
If this sounds like a reasonable plan for you, your next step is to start investigating student credit cards. Here are two suggestions to get you started:
- The Discover Student Clear Card is great for first time credit holders. There is no activation charge, no annual fee, and a 0% promotional purchase interest rate (for a limited time). It even earns up to 5 percent cash back on purchases made within rotating categories.
- The Citi Dividend Platinum Select for Students is a step up from the Discover Student Clear Card as it is designed to continue to improve the already stellar credit history established by students who already have a starter card. It also lacks common fees and offers up to 5 percent cash back on several of the most common spending categories for students.