Entering into a cycle of debt can threaten an individual's finances at any age, but incurring large balances at a young age are one of the biggest mistakes a college-aged adult can make, according to a recent report by First Command Financial Services.
"Spending and debt issues are significant problems for many college students, who have grown up in a world that often promises instant gratification. Even in today's troubled financial climate lenders are still all too willing to extend credit to young adults who may not yet have the life experience and judgment to properly manage these types of products," First Command Financial Services strategic development executive vice president Terri Kallsen said.
According to the report, dangerous financial behaviors among college students surpassed concerns over debt associated with college loans. Nearly 75 percent of financial advisors listed credit card debt and failure to create a budget as the top mistakes a young adult makes. Additionally, 48 percent of advisors listed not having enough savings as another setback and 40 percent named a lack of financial knowledge as a potential problem.
Separate reports indicate that students are more confident and likely to make smart spending decisions when they receive a financial education at home. Parents who take the time to teach their children how to spend wisely by giving them an allowance, educating them about banking and budgeting and explaining the importance of a consumer's credit score in obtaining loans may be benefiting their kids in the long run.
A recent report by Billshrink.com reveals that one-third of parents support the idea of providing their teens with prepaid credit cards to both gauge their spending habits and teach them about responsibility without jeopardizing their own credit scores. Another third of parents said they would consider the product an educational tool.
Another measure parents can utilize to educate their children are their own credit reports. While most teens may understand the importance of a credit score, few may know that obtaining and reviewing their credit reports once a year for accuracy is financially important. Explaining to children how their credit reports are analyzed by lenders, employers and insurance agents may prompt them to be proactive in the future regarding their credit standing and finances.