If your child is ready to head to college, there are questions that undoubtedly come up. Is it right that you should help out? How financially responsible will your child be, and should you co0sign for that credit card? You do need to have all the answers ready before the day arrives.
Should you help pay for your kid’s college?
After tax breaks, scholarships, student loans worth $30,000 and the $10,000 that the average student job brings in over four years, the typical family usually needs to come up with $30,000 for a degree at a public college, and nearly twice as much for a private college.
Finding the $8,000 a year that this comes to isn’t often easy. Parents often realize how they need to delay their retirement and forgo vacations to be able to pay.
Research by Georgetown University has found, however, that nearly all new job categories created in the past five years paying a middle-class wage require a college education. Increasingly, it is simply not possible to vaguely trust in the availability of well-paying jobs for those with no college. According to a Gallup poll, most parents do believe that paying for college for their kids offers them their money’s worth.
Families differ on how much they’re willing to give up, however. Only in half of all families do parents see it as a reasonable idea to borrow against their homes to help pay for a child’s college. In the end, whatever means families have, two out of three do actually help to some degree.
Should your kid get a credit card for college?
Marketers tend to believe that the first credit card a person gets sticks with them for life. People tend to have a soft spot for the bank that gives them their first taste of financial freedom. Many banks, then, tie-up with colleges and try to sign students on for starter credit cards, often offering free food and T-shirts as incentives. Since it’s hard for anyone under 21 to qualify for a card, however, parents usually need to co-sign.
Student credit cards usually come with high interest rates. Should your kid not understand how borrowing money on a credit card can quickly snowball into large sums owed, signing up for such a card could be a risky proposition.
Since these cards usually come with low spending limits, however, things can’t go too far out of hand. It’s often far better for a young person to make his money mistakes on a credit card with a low spending limit than on a regular one, later on, that involves thousands.
Each time a mistake is made, parents can help a kid learn from it and use the opportunity to bring up lessons about money, and how debt and credit cards work — minimum payments, interest rates, credit card consolidation (http://consolidation.creditcard/) and so on. As long as a credit card is able to give you an excuse to help your child learn about credit, co-signing should be a good idea.
Often, you don’t need to laboriously work out the pros and cons of a decision yourself. It can help simply to know what other parents do. This is what all those forums on the Internet are there for. When you begin to see how other parents think, it can quickly help your own thoughts crystallize.