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Why Your College Student Needs Both Budget and Credit Education

Dec 9, 2018

Teenagers rarely receive solid financial education in public high schools, so this responsibility falls on parents to complete. Unfortunately, some teenagers venture out on their own with little understanding about budgeting, the importance of saving, how credit works and more.

While learning the ropes of personal financial management is one option, this can be a stressful and potentially detrimental road for your children to walk down. As your teenager prepares to leave home and head off to college, consider these important reasons why you should provide effective financial management lessons to your teenager.

Living within Your Means

For most teenagers, living on their own in college is their first experience with living within their means and determining how their funds will be spent. This may be funds from a part-time job, from student loans or from other sources.

Without basic knowledge about budgeting and how to live within their means, many college students will face extreme stress. They may turn to you repeatedly for extra cash to pay bills because they have carelessly spent their money from month to month. An alternative is that they may charge up credit cards and bury themselves in debt.

Avoiding Debt

College students often receive multiple credit card offers. They may view credit cards as an excellent way to pay for luxuries and experiences now and to worry about paying for those things at a later date. This unfortunately can lead to high credit card debt balances spread over several accounts by their graduation date.

This credit card debt may be combined with student loans and a car loan to create intense financial stress. It’s also worth mentioning that, in the digital age, it’s easy for lenders to find up to 96% accurate financial risk analysis to base their decisions on. When teens understand how to use credit responsibly, they may take on much less debt during their college years and protect their future.

Building Credit

While debt from credit cards can be detrimental, it also can be advantageous when managed responsibly. Mortgage companies, apartment rental companies, utilities companies and others often complete a credit risk analysis on new applicants to determine their creditworthiness.

College students who use a single credit card responsibly to build a positive credit history may be at a strategic advantage after graduating than many of their peers. This means if they plan on something like starting a business, a good report from and similar agencies can help them get the money they need.

Personal financial management is unfortunately not something that comes naturally to many young adults. The concepts of budgeting, building credit, managing debt and more can be confusing. As a parent of a teenager who will soon be leaving the house, consider spending the next few months providing your child with a sound financial education and preparing your child for smart money management decisions going forward.

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