Does Your College Kid Make These Money Mistakes?
NEW YORK ( MainStreet) When John Ulzheimer was in college, his parents gave him a Texaco gas credit card just for gas. But instead, he swiped that card for beer, chips and sodas every time he went to the corner gas station with his friends to the tune of over $3,000 by the time summer came around.
"My parents dropped the hammer and told me that I was allowed to keep every dime of my summer earnings, as soon as I paid them back for the plastic abuse," says Ulzheimer.
So, he learned the hard lesson about how small purchases add up and about the high cost of credit before it became a serious debt. Now he is the credit expert at CreditSesame.com.
Not all kids make big money mistakes
Young adults don't get much financial respect on the assumption they are irresponsible with credit cards and money. So, The U.S. government enacted The Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009 which made it illegal to issue a credit card to anyone under the age of 21 without a job or a co-signer. This law can have protective benefits to maturing adolescent minds, especially when it comes to making long-lasting financial mistakes.
But, recent findings from researchers at the Federal Reserve Bank of Richmond and the University of Arizona counters discovered that people under age 21 are actually better at managing their credit than those in their 40s.
The study compared several age groups using bank data from before the enactment of Card Act of 2009 and after and found that those under age 21 are substantially less likely to cause a serious delinquency , such as paying a bill 90 days late, and least likely of all age groups to default on a credit card.
Is your college student the financially responsible type or not so much? Now that it's the middle of the school year, you might have become aware of some minor (or even major) mistakes your college kid has made with money.
Poor college grades may lead to poor money management
You may notice poor grades before or along with other major money mistakes.
"If students display a poor work ethic and cannot handle the basic responsibility of maintaining an agreed upon GPA during school, that behavior can easily transfer to irresponsible use of a debit card and credit card," says family finance expert Ellie Kay, author of Lean Body, Fat Wallet (Thomas Nelson, 2013).
Poor grades across the board may mean a student is not emotionally or academically ready for college or interested in attending college full-time. The colleges put students on academic probation for poor grades (in danger of being expelled and losing credits for withdrawn or failed classes), and students will likely also lose any institutional academic grants or state-based academic eligibility for funds for subsequent semesters. If poor grades are the case, insist on a specific GPA the following semester and if not met, stop spending money on the college. "I tell my kids (and I have seven) that my love is unconditional but my money is conditional," says Kay.