TIP: Got students? Teach them how to use credit wisely

In times of economic downturn, college students are turning to credit cards more than ever before. Although a new law prohibits issuing credit cards to those under 21 without a co-signer or proof of a steady income, much of the damage has already been done. Consider this, according to Sallie Mae's 2009 National Study of Usage Rates and Trends:

* Undergraduates are carrying record-high balances—an average of $3,173. Seniors graduate with an average balance of $4,100;
* Eighty-four percent had at least one credit card, and half the students have four or more;
* Less than one out of five students pay off balances each month;
* Ninety-two percent of students charge textbooks, school supplies, or other education expenses; and
* Food (84%), clothing (70%), and cosmetics (69%) are also frequently bought on credit.

Despite high credit card usage, more than one-third of respondents have never or only rarely discussed credit card use with their parents. These same students were also more likely to charge tuition or be surprised at a high balance.

Parents: You can help. A large majority of those surveyed expressed interest in more financial literacy education. You can provide guidance throughout middle and high school to help better prepare your student to manage money in college.Talk with them about money, and start with the basics. Focus on the importance of saving and responsible spending. Encourage them to use direct deposit for their pay checks—a savings account at Hawthorne can help them get started. If your student does use a credit card, stress the dangers of piling on too much debt. Put the real price tag into perspective--calculate with them how much interest piles on to that new pair of jeans if they do not pay their balances off each month. Also, remind them to keep their credit scores clean by carrying a low balance relative to their available balance, paying all bills on time, and regularly checking accounts for unusual activity. Responsible money management is important at all life stages.

Hawthorne can help. We have several online tools to give college students the basics of financial management and topics that you can use to start the conversation. If you have a middle school or high school student, it's never too early to start. We have a BalanceTrack for teens, too.