A couple of days ago LadyBowTie celebrated her 1st birthday. In celebration, I wanted to re-post a bunch of my favorites from this last year for my new readers to enjoy and so you could reminisce with me.~Cori
Only Use in the Event of an Emergency
My problem isn’t with what people choose to spend their money on it is how they spend their money. Primarily I have a problem with credit cards. Credit cards have become so common place as a financial crutch that people have made it so they can’t live without them.
I recently read an article by Tim Chen “5 College Credit Card Gimmicks” that disturbed me. He wrote about watching out for hidden fees and co-signers for college students with no income, etc. All helpful stuff if you are in the market for a credit card. The part that disturbed me was that this was directed towards freshman in college and their parents. Why does a freshman in college need a credit card? Many parents will chime in saying that since they are away from home it will be good for them to have one in case of an emergency and to buy books, snacks, etc. In theory this is a great concept and 9 chances out of 10 parents feel that they have a fairly responsible young adult that can be trusted with a credit card and to really ONLY use it in the event of an emergency. At 18, the parental influence is still strong and ringing in that kid’s ear.
Another parental defense of credit cards is that it will teach your college student financial responsibility. I have a few questions:
1) Shouldn’t they have been learning financial responsibility for quite some time now?
2) Why do you need a credit card to teach them?
3) What’s wrong with cash and a regular old checking account that you can deposit an allowance into?
You will get the same money management lesson if you put $500 into an account for them and say this is it for the semester for expenses and emergencies. If for some unforeseen reason an emergency arises beyond that amount you can get money to them fast and electronically. I haven’t laid my hands physically on a dollar bill in month. Online banking and debit cards are an amazing invention.
Teaching the ease of credit and the virtual uncapped spending options of a credit card will only give them false sense of financial stability. You should only spend the available real cash you have in the bank not the fake cash you have on that piece of plastic.
Like I said, most college students respect their parents rules and usually do what they are told. However, its when they reach their 20′s and out on their own that the credit card monster whispers in their ear. I’ve experienced this myself, and I’ve witnessed it on too many occasions to count. Its stronger than any drug, the lure and seductive draw of instant money. “I’ll just put it on my credit card…,” those sweet words roll off your tongue too easily; I’ve heard it a million times and I’ve said them myself far too often. Plus, there are no parents around to get the bill, Yippee!
What happens in your 20′s is EVERYTHING! You are free to go and do as you please and every occasion calls for spending money. Your friends rent a limo to go to Atlantic City and you have to get the beer and snacks for the road. Oh wait, and you definitely need an new outfit too! Everything is an event and you do not want to miss out on one single minute of it! It passes through your mind for a split second, I have $20 in my account, and then the magic genie in your wallet named Visa gives you three wishes and off you go to explore the unknown. Legends have been made from some of my credit card hangovers.
Your intentions are initially good. You get a credit card, based upon what your parents said, “…for an emergency…” and before you know it, a new fall wardrobe, new brakes for the car, electric bill and a trip to the vet for you cat and your emergency fund is now the emergency. Before you know it you are 30, you want to get married, buy a house and start having kids and you’re up to your eyeballs in debt. But you sure do have a million and one awesome stories to tell about insane nights at warehouse clubs in the city, vacations to exotic lands and a ridiculously expensive pair of shoes you left in a cab. Sound familiar? All too familiar to me.
Seeing the possible financial future of your budding young adults, I ask the question again, why give your college kids a credit card? I already know the answer…because you don’t have the cash yourself.
I’m not saying that every college kid will run wildly out of control with their spending, all I’m saying is that it happens and it happens a lot. Get your own credit card spending and debt under control. Be a good financial example for your kids (or to a young adult in your life). Spend responsibly and teach them about the financial downfalls and temptations of credit cards.
Great article!