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On Spring Break, With Their Heads in the Sand

Here's what one freshman planning on vacationing in Miami said to me: "When exactly do you expect me to have fun? I am young and will only be this way for a little while longer. I have learned a lot about sacrificing and responsibility. I do understand that going to Miami may not be a wise decision, but I have rationalized the decision."

I couldn't get this young woman, who is funding her education largely with student loans, to see that her reasoning was flawed. She rationalized that because she had paid cash for the trip, she therefore could "afford" to take a break.

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But it doesn't matter if you are paying cash for a luxury item if you have consumer (or in this case, student loan) debt. Any money you have to spare -- say, for a vacation -- should be applied to that debt or saved for necessities. Now that's sacrificing for your long-term financial well-being. That's the responsible thing to do whether you're young or old.

I'm not saying college students have to live like monks and deny themselves all worldly pleasures. But the time to party is when the bills are paid.

Let's suppose a college student who had $860 to spend on a vacation in Cabo San Lucas instead saved that amount every year for 10 years. At a rate of return of just 2 percent, compounded monthly and taxed at a marginal rate of 28 percent, he would end up with $10,178. That's a good chunk of change that could be used to buy a car or go toward the down payment on a home.

Now what if that student instead put that $860 spring break vacation on a credit card with an interest rate of 18 percent and made only the minimum payment of 2 percent? It would take him nearly 17 years to pay off that debt. In that time he would have paid more than $1,500 in interest. (Don't scoff; this happens all the time.)

I know college can be tough. Yes, many students work hard and could use some fun time. But they'd better learn now that they aren't entitled to that fun at the expense of handling their personal finances in a mature way. It's vital that they stop the madness (not just in March) and learn to spend wisely in their youth. As Tennessee Williams wrote in "Cat on a Hot Tin Roof," "You can be young without money, but you can't be old without it."

Michelle Singletary discusses personal finance Tuesdays on NPR's "Day to Day" program and online at www.npr.org. Readers can write to her at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071 or send e-mail to singletarym@washpost.com. Comments and questions are welcome, but because of the volume of mail, personal responses are not always possible. Please also note that comments or questions may be used in a future column, with the writer's name, unless a specific request to do otherwise is indicated.

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