Although it might seem like summer vacation just started, the beginning of the school year is fast approaching. For those students headed off to college, many will be experiencing life away from home for the first time.
Despite the ever-growing number of students relying upon student loans, there are still unexpected expenses that arise during the year. Cars break down; new books are needed for class. However, paying for these expenses is not always easy. Often, many parents put these expenses on credit cards, which could cause significant debt and ultimately result in filing for bankruptcy.
Before students head off to school, parents may need to decide how to approach these expenses to prevent that from happening. Part of that discussion may concern whether or not their children should be allowed to have their own credit cards when they go off to school.
Under new rules passed during the most recent financial crisis, it is much more difficult for students to get credit cards. In fact, most under the age of 21 will require a co-signer before a card will be awarded.
If the parent agrees to be the co-signer for their child, they will be held responsible if their child is unable to pay these debts. If parents decide to go this route, they need to have a discussion about financial responsibility. They need to clearly state what the card may be used for, and how charges will be paid.
A better idea may be to allow a student to have a debit card that takes money directly out of their accounts. This way they are unable to spend money that they do not have. Emergency expenses would need to be addressed as they arise. Helping children get started off on the root foot financially can help them emerge in a sound position when school has ended.
Source: The Miami Herald “Parents face choice on cards for college kids” Dave Carpenter July 11, 2012.