The School of Hard Knocks

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Charity Amt. Raised
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TOTAL $337,429
As of January 9, 2007
Foolanthropy 2006
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By Ellen Bowman
January 30, 2007

Quick poll: Raise your hand if you weren't broke in college.

I thought so.

Of course, "broke" means something different to everyone. Depending on your circumstances, we could be talking about eating so much ramen you were at risk for developing scurvy by semester's end, or we could be talking about having to scale back your spring break plans from the Riviera to Cancun. (If this was you, I don't want to hear about it.) Wherever you were on the spectrum, though, it's a good bet you didn't have a lot of disposable income. Somehow, college students never do.

Enter credit card companies.

It's really expensive to be a college student. (Books alone can cost upwards of $1,000 a semester.) Credit card companies know this, and they market aggressively on campuses. And there are a lot of opportunities for students to make financial mistakes -- a lot more than there are opportunities to learn about how to avoid them.

A recent article from highlights just how deeply credit cards can affect students, both in college and afterward. The article quotes Shalonda Jones, a representative of the National Foundation for Credit Counseling, as saying too many college students go off to school without understanding finances: "We all know when you're away from home with a little freedom and money, students tend to take that freedom and lose their heads."

Many of us know very well that the freedom college brings can lead to the occasional stupid decision. Keggers and hazing immediately come to mind. This is normal, necessary, and even healthy. Well, maybe not mixing a keg stand with hazing, but making some mistakes during young adulthood is part of growing up. The key is to make sure that you're not paying for those mistakes years or even decades later.

Let's say at 20 years old, you max out a credit card on trips to Urban Outfitters and your local bar. You never pay it off, and your credit score takes a big hit. Do you realize that when you're 30, your chances of being approved for a home loan, an auto loan, or even a job might suffer because of that youthful mistake? (Lots of employers check credit these days.) You probably don't even think about it.

In the CNN article, Jones says college students should only have a credit card if they have a job, even if it's only part-time. This is one way to ensure that the money coming in will at least help to balance the money going out. Another good way to avoid such pitfalls would be to make sure college students get a solid education in financial literacy. While this is, unfortunately, unlikely to become a required subject at most schools, there are organizations dedicated to furthering its cause.

One of them, the National Foundation for Teaching Entrepreneurship (NFTE), was selected as a recipient for our annual online charity drive, Foolanthropy, in 2006. NTFE works to help young people from low-income communities do better in business, school, and life by teaching them about entrepreneurship and financial literacy -- and it raised $91,341 from Fools this year.

Obviously, Fooldom is a community with a lot of interest in financial education. Just as obviously, it's a community with a lot of generous members. Even if your college days are far behind you, you can get involved with organizations like NFTE to help today's budding scholars understand the basics of managing their money before their situations become dire. Helping college students learn to invest in MasterCard -- rather than maxing one out -- could be the best thing you can do for their future.

Ellen Bowman graduated from the University of Houston in 2001 (go, Coogs). She owns no shares mentioned in this article. If her mom is reading this, she's never even heard of a keg stand, honest. The Fool has a disclosure policy.