This may fall under the label of “college students think they know everything.” But recent studies have shown that, contrary to what these college students might believe, they definitely do not, at least when it comes to managing their money. The American Institute of CPAs conducted an anonymous online survey of 751 college students who plan on enrolling in classes this year. What did they find? While over half of the respondents rated themselves as having good or excellent financial skills, almost the same percentage reported having less than $100 in their bank account. Not exactly a case for top-notch financial management skills, is it?
The Disconnect Between Reality and Belief
Approximately 57 percent of survey responders said they have “good” or “excellent” financial management skills. The bottom tier, a measly 12 percent said they have “poor” or “terrible” financial management skills. But when questioned further? The answers became a little more interesting and perhaps more telling of the true state of college student finances. 11 percent had recently missed a bill payment deadline. 38 percent said they had borrowed money from a friend or loved one in the past year. And of course, 48 percent had only $100 or less in their bank account.
Sure, you could argue that this might not be too uncharacteristic of young adults who still live at home and have yet to move away to college. You could make the case that they had probably already paid for their tuition and drained their savings doing so. And you might get excited by the other results of the survey – 99 percent said good finance management was very important. At least they know it should be a priority. But let’s state the facts. College students don’t make their financial health a major priority.
Teaching College Students Financial Literacy
How many college students do you know follow a budget? How many limit their nights out, shop frugally and use their spring break to work extra in order to boost their savings? While there definitely are some finance-focused college students out there, it doesn’t seem to be the norm. On the other hand, how many twenty-somethings do you know are drowning in debt? How many are overwhelmed but still can’t seem to stop the spending?
The way college students spend their money can have major ramifications for the rest of their life. For one, they can get into major credit card debt that could take years to pay off. College is the first time the credit bureaus have been able to pursue them, and for the most part it’s an easy sell. You mean this magic card can buy me things even when my bank account is empty? Sign me up!
Also, college students are making financial decisions at some of the most formative years of their life. They are establishing their own identity as independent adults. If they get into the habit of spend spend spend rather than save save save, this destructive mindset can carry over into their later years. Sure, college is a time to have fun, kick up your heels and enjoy being young – but it’s not time to break the bank and ruin the rest of your young adult life when the bills start coming in the mail.
College students should be taught actual financial literacy such as how to budget. They should know the importance of an emergency fund. They should be educated on the dangers of excessive credit card use. It is not wise to send young adults into the world without the tools they need – in this case knowledge – to combat pressures of society. In reality, the education should start in high school or even earlier and the importance of proper money management established at a young age. Make it a priority to educate yourself if you feel a lack of knowledge in your life, and pass this information on to your children. Life is too short to spend it paying back unnecessary debt.