Illiteracy in College: A Look at the Financial IQ of Undergraduate Students
Although college students everywhere are acquiring plenty of knowledge about subjects ranging from architecture to zoology, it appears that they may not be learning enough about personal money management to take good care of their own finances. In its 2004 study of credit card usage by undergraduates, the student loan lender Nellie Mae noted that 76 percent of college students have credit cards and that by the time they reach their senior year, 56 percent of students carry four or more credit cards, accumulating an average balance of $2,864. In addition, a recent survey commissioned by Bank of America found that approximately 58 percent of college students have no set budget, and 18 percent have no solid idea of how much money they have at any point in time. Even more alarmingly, the Richmond Credit Abuse Resistant Education (CARE) Program reported that the number of 18- to 24-year-olds who have declared bankruptcy has increased 96 percent in just 10 years.
So what is perpetuating this problem, and where can students find some needed financial guidance? To answer the first question, it is necessary to take a look at the literature about personal finance. According to Dr. Robert D. Manning, Research Professor and Director of the Center for Consumer Financial Services at the Rochester Institute of Technology, the main contributing factors of student debt include the extension of unaffordable credit lines, peer pressure to spend, financial naïveté, and increasing education-related expenses. Typical symptoms of financially risky behavior, as described by Karen Blumenthal of the Wall Street Journal, involve not paying bills on time and taking out payday loans.
Despite the prevalence of this debt virus, there are a number of measures that students like you can take to prevent – or rescue – yourself from becoming another victim. One of the simplest things to do is to check with your college or university and see if it offers any workshops or seminars about personal money management. Numerous institutions have introduced projects covering this subject, from Rutgers University’s campus-wide Financial Independence Training campaign to Texas Tech University’s Red to Black program.
Furthermore, whether or not your school has a program on personal finance, you can expand your knowledge of the topic by reading a few publications, such as this free (translation: money-saving) guide published by the National Endowment for Financial Education, titled 40 Money Management Tips Every College Student Should Know. In its brief 32 pages, the book painlessly coaches you on every essential, from checking accounts to credit cards to savings and investments.
To find out more about college students and credit card debt, click here.
To read the National Endowment for Financial Education’s 40 Money Management Tips Every College Student Should Know, click here.
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