Don’t Let Your Kid Become One of the 60% of College Students Who Believe These Money Myths
College students have a lot to learn about managing money -- and they know it.
Many students say they aren’t well-educated about personal finance, according to a recent study by U.S. Bank. It surveyed 1,640 full- and part-time students ages 18 to 30, weighted to match the demographics of undergrad enrollment in the U.S.
The study yielded some important -- though, maybe not surprising -- results. Students don’t believe they have strong money-management skills, and their replies to basic financial questions show they’re probably right.
What Students Don’t Know About Budgeting
While most students (66%) report having a job, 44% say they have little to no knowledge about creating and maintaining a budget.
And 21% say they “are barely keeping up” with their personal finances.
Being broke during college seems par for the course, so you might not see a problem with this.
But when you consider the broader financial issues young adults seem to be clueless about, you start to see potential problems in the future.
What Students Don’t Know About Their Credit Score
Consider credit scores, for example.
Most students will leave college with one major mark on their credit history: student loans. Many of us also get a credit card in our 20s, possibly other loans for a car or a mortgage.
This study shows a frightening lack of knowledge about how credit is calculated:
- More than half of students do not check their credit scores.
- 60% believe using checks and debit cards helps to build credit.
- 47% believe a student loan cosigner will not be held accountable for paying off the loan if the student doesn’t find a job.
- 61% believe once a delinquent loan, credit card balance or bill is paid off, it is removed from one’s credit report.
If you’re scoffing at these facts, great; you probably know more about your credit score than most of your peers.
If you’re surprised to learn these aren’t true, you’re not alone. And you’re at risk for making some bad decisions that could seriously harm your credit score -- without even knowing it.
What Students Don’t Know About Retirement
Unsurprisingly, people in their 20s are largely unconcerned with retirement.
When asked to rank factors that will contribute to a happy life, students prioritized steady employment, paying off loans and debt and being financially independent.
Owning a home, having a high income and planning for a comfortable retirement were low on the list.
That means students aren’t worried about building credit, growing their savings, learning how to manage a 401(k) or contributing to Social Security.
Why Students Are Clueless About Personal Finance
While the numbers may seem shocking, these facts really aren’t a big surprise. Think of your own financial education.
I know my high school offered one elective course in Personal Finance. It wasn’t too attractive among the electives that could teach me to play an instrument, speak a foreign language or bake cookies all afternoon.
Instead, students said they relied heavily on their parents to learn how to manage money. That’s a lot of pressure on parents, who, most likely, also learned by example -- or trial and error.
Plus, our parents probably didn’t come of age in a culture where student loan debt was about as common as a driver’s license and plastic had all but eliminated cash.
Teaching Kids About Money
So how do we better educate ourselves and avoid raising the next generation as clueless about money as we have been?
First, admit it’s tough. Investing is complicated, retirement seems light years away and credit card companies bank on the fact that none of us understands what half of their policies mean.
Then, simplify what you can.
For yourself, start with learning how to contribute to your 401(k) and what that means for your retirement. Learn which factors contribute to your credit score and, if necessary, what you can do to improve yours.
For your kids, start with something small like a piggy bank and a specific goal for the money. This can demonstrate the value of otherwise boring pieces of paper and metal.
Check out these nine fun ways one mom is raising future Penny Hoarders to get ideas for teaching your kids about saving and budgeting.
And for your sake and your kids’, remember that saving money doesn’t have to mean giving up fun!
Learning about personal finance doesn’t have to be boring -- because, apparently, when it is, we don’t learn much anyway.
Learn more and view the full report from U.S. Bank.
Your Turn: Do any of these statistics surprise you?
Dana Sitar (@danasitar) is a staff writer at The Penny Hoarder. She’s written for Huffington Post, Entrepreneur.com, Writer’s Digest and more.