In the aftermath of the credit crisis, credit education is increasing. Programs like MasterCard’s ‘Are you Credit Wise?’ target college students particularly, and aim to inform potential cardholders of how to responsibly use credit. And the programs are successful in that respect. But what this type of program fails to do is teach students about responsible spending in general.
The overall aim of credit companies is to make consumers spend more using credit. It’s how their business works. A way of doing this is to make people feel comfortable about credit and to spread the belief that having debt is acceptable.
Though some students get in trouble for their irresponsible credit card use, many others are spending limited amounts of money. Aside from academic expenditures ‘-‘- like books ‘-‘- there aren’t many costs that students face regularly. Because of this, most college students don’t need to utilize credit to get by. It’s far more important for students to develop good spending habits now, rather than becoming involved with spending money that they do not have. Ideally, credit companies would be educating students on things like how to create a budget, how to balance a checkbook and how much is appropriate for a realistic loan on a realistic income.
When students graduate, their financial lives will change substantially. Cost of living will go up but, fortunately, so will income ‘-‘- hopefully. It’s inevitable that some people will have to purchase things that they can’t afford, such as a house or car, and then credit will undoubtedly be used.
But students need proper education so that they will be prepared when credit enters their everyday lives. Unfortunately, credit companies don’t profit from responsible loans and rapid payment, so consumers should always bring a dose of skepticism with them when listening to credit companies’ proposals and sales pitches.
For now, students can focus on balancing their spending and being real about what purchases are actually necessary. Credit is surely important in today’s economy, but we’ve all witnessed what irresponsible credit can do. By building good spending habits and making sensible use of credit now, students will be prepared for graduation.
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My name is Hersh Parekh, a student ambassador for the Are You Credit Wise? financial literacy program on campus. I was interviewed for this editorial and my campaign was referenced. However, I’d like to issue a few corrections about the statements so that the content of this editorial does not contain any inaccuracies about the financial literacy information I provide.<p/>AYCW provides important money management information that teaches college students how to develop responsible spending habits, including how to create a budget, and how to manage a bank account– two items which were incorrectly stated as being absent in the AYCW curriculum. Moreover, AYCW teaches other valuable personal finance topics such as how to understand a credit report, what information comprises credit scores, and how the financial habits we maintain today will affect our future careers (yes, employers can check the credit histories of prospective employees when considering candidates), our future loans (better know how your credit score will affect your APR) and our futures in the post-graduation world.<p/>I invite the Daily Free Press editorial staff and all BU students interested in learning more about personal finances and how to maintain good credit to attend my next presentation at 11