Do you have college age kids? Do you remember being a college-aged kid yourself? Chances are likely that you can relate to how financially unsavvy college-aged kids can be. There are outliers, but most college-aged kids know very little about personal finance, and end up making expensive mistakes.
Some of you may relate to the freebies given out on campus to encourage signups. Free frisbee?! “Sure, I’ll sign up for your credit card!”
While others of you may still be paying back those crushing student loans, and wondering if the value of your education was really ‘worth it’.
In any case, we all make mistakes, but teaching our kids to do that before they leave home to go to college or strike out on their own is a smart way to ensure they don’t get a C or lower when it comes to their personal finance knowledge.
They’re excited they get to pay back student loans for the next 25 years!
College Students + Personal Finance Study
While I could talk anecdotally about college aged students, let’s instead dive into some data. Recently U.S. Bank released its 2015 U.S. Bank Students and Personal Finance Study based on a survey of 1,640 college students.* There were some interesting results.
- Nearly 50% of those surveyed said they would give themselves a C or below when asked how successful they are in managing their money.
- 91% of those surveyed learned about money from their parents, either directly or by example. This wasn’t shocking, but it does go to show you kids are watching AND listening. It’s not just about listening to what Mom & Dad say about money, if they hear you talk about saving, but see you racking up debt they are likely to live by example.
- 55% of students identified their parents as the #1 influence on their financial habits AND their go-to source for financial advice. This can be a good thing if your parents are fiscally responsible, but not great if your parents are struggling.
There is hope, though. The statistics also brought to light some ways you can help your kids whether they’re college age or headed that way in the near future.
Budgeting Advice For College Kids
Budgeting is the key to financial success. Knowing how much money you have coming in and how much is going out is only the beginning, but it’s a good place to start.
- 21% percent of students say they are barely keeping up on day-to-day expenses.
- Only 5% of students say they are prepared for unexpected expenses.
- 44% say they have little to no knowledge of creating and maintaining a budget.
Start with teaching your kids the basics of budgeting. I have a helpful post and printables on how to budget to get you started. Remember this is new to them, so be sure to check in and see how well they’re doing over the course of a few weeks. They’ll encounter unexpected expenses, one-time fees, and other issues that will throw off their budget. Make sure you know how to steer them back on track.
Credit Advice For College Kids
Credit can be tricky for teens and young adults to navigate. The key is to put debt into a perspective they can understand. One way that works for most teens is the ideas that their future selves have to pay for the choices they make today…..with interest!
You can also work together to figure out a long-term goal and explain how a purchase now means waiting even longer to reach that goal. If, for instance, they’d like to do a semester abroad in 2 years that may mean skipping out on dinners out with friends or working extra hours. Going into debt only means they won’t be able to reach that goal.
- Only 39% of students correctly know that paying off a delinquent loan or credit card balance is not enough to remove it from a credit report.
- 60% believe using checks and debit cards can help build credit.
- 47% believe a co-signer will not be held accountable for paying off the loan if the student doesn’t find a job.
Read more: the who, what, why of credit scores , how to build credit without credit cards, and our guide to everything credit.
Saving For The Future
Saving for the future may seem a bit ridiculous when you’re a teen or young adult since their brains are wired to work in the now. But a little planning and saving can go a long way to helping them succeed. Be frank about savings, and show them the magic of compound interest-that alone might make them save more.
- 63% of students think 401k investments are guaranteed or don’t lose value.
- More than 60% say they had little to no knowledge of investments or retirement savings.
Want More Help?
U.S. Bank created the “Student Union” to empower students by providing engaging tools, events, peer-to-peer feedback and resources that are critical to building financial literacy in a fun and positive environment. The site is also meant to help students and parents engage in discussions about finances and money management, including the importance of credit and significance of credit scores.
What are some ways you are teaching your kids to manage their money? What do you wish you had known when you were in college?
Kelly
*U.S. Bank’s survey, which included a 12-question true/false quiz, uncovered gaps in students’ overall understanding of personal finance, especially in three critical areas: budgeting, credit and/or saving for the future.
