Study: Parents set financial examples for kids

Today, college kids are graduating with tens of thousands of dollars or more in outstanding debts spread across several different accounts and credit types, and new research suggests that in many cases, their parents might play a role in their doing so.

Discussions and interactions related to money with their parents can have a major impact on college students' approach and attitudes toward carrying debts, particularly on credit cards, according to a new study from East Carolina University published in Spring's Journal of Family and Economic Issues. Students were quizzed by researchers about the number of credit cards they own, how they interacted with their parents when it came to finances in general, their work experience, financial knowledge and more, and the results were slightly surprising in some cases.

Some basic facts
It should come as no surprise that many college kids now have a credit card in their own name, and in fact, about two-thirds of them do, the report said. Of that group of card-carrying college kids, about half had more than one such account in their name.

In particular, college juniors and seniors were about four times more likely than freshmen and sophomores to have more than one credit card, the report said. That could be attributed, in part, to the fact that relatively new federal laws require those under the age of 21 to have an adult co-signer on any new account they wish to open, or otherwise provide proof that they can afford the account they want. This more stringent qualification method can have a profound effect on the ability of younger students to obtain credit cards in general.

Further, females were more than twice as likely than their male counterparts to have two or more credit cards, the report said. Finally, borrowers who said they are comfortable making only the minimum payments on their credit card bills every month were similarly more likely to have two or more cards.

Where parents come in
However, it seems that another major indicator of whether a student will have credit cards and the debt that necessarily comes with them in most cases is whether their parents have argued about finances, the report said. Those who reported that money was a constant source of discord between their parents were, as with females, twice as likely to have two or more cards as students whose parents rarely or never argued about money.

Those arguments seem to have had an impact on how much debt a young borrower carries as well, the report said. Kids whose parents clashed over finances and other money matters were far more likely to have been carrying debt of more than $500 at the time of the survey. In general, though, those who had two or more credit cards were about three times more likely to have that much debt than borrowers who had just one.

"It is clear that the influence of parents cannot be underplayed," the authors of the study wrote. "Researchers, educators and policymakers should work with, and include, parents in finding effective ways to increase the positive financial behaviors of college students, particularly those behaviors related to credit card use. We need to help students and parents learn financial skills and establish healthy financial attitudes at earlier ages to prevent poor financial habits from taking root."

What parents can do
If you're a parent who has a child who's currently in college or even getting to the age where he or she should start thinking about applying for schools, it can be vitally important to take the time to explain to your kid about the right and wrong ways to handle credit cards and other types of loan balances. This kind of knowledge can not only help a young adult deal with their money in the most responsible manner possible, but also set them up for a lifetime of good credit behavior.

Imparting wisdom about things that keep credit scores healthy, such as making sure all payments are made on time and in full and the importance of keeping outstanding balances as low as possible, can serve them well for decades. Similarly, talking to them honestly about the kinds of missteps you may have made in the past where your credit is concerned, and what effects those mistakes had on your life, can be just as valuable a teaching tool.

Of course, when you want to make sure of your own credit health, one of the best ways to do so is ordering a copy of your credit report. This will allow you to check the document for any unfair entries that may be marring your credit standing, and working with a credit repair law firm might help to clear up these matters.