First Lesson For New College Students: Finances
NEW YORK (CBSNewYork) — As college students head off to school, most are getting their first taste of independence. But if they’re not careful, money mistakes they make now could take years to correct.
There are signs that students are becoming more responsible. According to college loan company Sallie Mae, the number of students who own credit cards dropped from 42 percent in 2010 to 30 percent this year. Among credit card users, 75 percent carry a balance of $500 or less, CBS 2’s Alexis Christoforous reported Thursday.
But a recent survey found that nearly a quarter of parents help pay at least a portion of their student’s credit card bill.
While they can potentially drag young adults into significant debt, credit cards are OK if used responsibly, financial experts say. A credit card in a student’s name can be a good way to help him or her establish a credit history.
“You can co-sign with your child to get a credit card, and you can also request certain spending limits,” said Tobie Stanger, a senior editor for Consumer Reports.
Another way to teach young adults about financial responsibility is to give them a debit card, which 80 percent of students use for everyday expenses. With a debit card, they can deposit money into the account and track their spending.
Experts suggest choosing a debit card with low fees and not opting for overdraft protection.
“If the student has an overdraft, yes, they’re going to pay up to $35, but they’ll learn a valuable lesson,” Stanger said.
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