There’s more than one way for your adult child to screw up her future.
As a parent, you may be more afraid of the long-term effect of a terrible tattoo than that of a financial blunder. But both can be regrettable (if not permanent). So here are five regrettable money-themed tats and five money snafus your college-age kids need to look out for.
Which is worse? Share with your kids and decide for yourselves!
A loan to a friend could turn into a handout
College kids can be extremely generous when it comes to their friends—sometimes to a fault. Spotting your roommate to get through the week can seem like a harmless, helpful, gesture. But loaning money to a friend could turn out worse than having a dollar sign tattooed on your palm. (Actually, no, that’s not possible.) Why? There’s no such thing as a loan to someone close to you, because, more often than not, you’ll never see that money again. If you’re determined to help a friend out of a tight spot, don’t think of it as a loan.Think of it as a gift—and don’t count on getting the money back. Since you’re likely kicking in for tuition and expenses, money could be tight for you too. So if you can’t afford to part with the sum entirely, don’t lend it. And avoid borrowing money from friends yourself, too, if possible. If you must, make sure you pay them back within 24 hours or so. Any longer and there could be hard feelings—or even a ruined friendship.
Credit: Ask Ideas
With loans, as with tattoos, use your head wisely
If you can, avoid taking out private student loans to pay for college expenses. Private student loans, like a misplaced tattoo, could be a regrettable inconvenience for years. (This poor kid!) Federal loans are cheaper than private loans, which can have interest rates of 18% or more. Plus—and this is even more important—the options for paying back federal loans are much more flexible. So max out your federal aid before you consider private lenders.
Credit: Team Jimmy Joe
Accruing credit card debt is as easy as pie
Don’t rack up credit card debt! You’ll probably have student loans to pay off when you leave college—you don’t need to make matters worse with high-interest credit card debt as well. Plus, if you find yourself in a financial bind and need to skip a payment, you could damage your credit score for years, which could in turn make you ineligible for the best interest rate on an auto loan or a home loan. Yes, credit card debt is almost as bad as getting a credit card-and-pie arm tattoo! If you already have some, use your savings to pay it off. A lot of people think you need credit card debt to build credit. You don’t! Being on the ball and paying your credit card bill on time each month—in full—helps build your credit score.
Credit: Chad Newsom
Start saving today (even if you have to tattoo that on your arms)
Young people aren’t exactly known for their long-term financial planning. That’s too bad. In fact, you should get into the habit of saving 15% of your earnings as soon as you have some. That may seem impossible if you’re only bringing in a couple hundred dollars from a part-time job, but the discipline will be good for after college, when that 15% chunk you’re saving will help furnish a down payment for a house—or a three-to-six-month emergency cushion if you lose your job. So maybe skip getting that “Start $ today” double-wrist tattoo and put that money to better use in a savings account! The best place for someone in college to keep their money is a Roth IRA. You can sock away up to $5,500 of your income each year—sorry, that birthday cash from Grandma won’t work here. And because you’re “starting $ today,” your early savings have a chance to grow into a big nest egg come retirement.
By any and all means, track your spending!
It may be a rare quality among the college-age set, but sticking to a budget is essential. We’re not suggesting that you, say, get a McDonald’s receipt permanently tattooed to your arm. But keeping track of what you’re spending and where will help keep more money in your pocket (or your Roth IRA). Apps like Mint and Prosper Daily are great tools for keeping tabs. In my new book, Make Your Kid a Money Genius (Even If You’re Not), I tell a story about a college freshman I know who called her mom in a panic when she thought her debit card had been hacked because her balance was so low. But when they talked through all the purchases she’d made, the girl realized she had in fact spent all the money herself—all those nights out and Uber rides had added up.
Credit: Romerikes Blad