College Students Doing Better at Managing Personal Finances Than Generations Before
Posted By Donna Fuscaldo on March 16, 2016 at 11:53 am
Lots of people may think college students have no clue how to manage money other than spending their parents’ cash, but it turns out a new study from SallieMae, the student loan lender, shows they are actually very financially responsible, even more so than their parents and some of the generations before them.
“Conventional wisdom has a lot to learn,” says Rick Castellano, a spokesman at SallieMae. “Most American college students are handling their finances carefully and determined to be financially aware consumers.”
Unlike some of the generations before them, a lot of today’s current college students grew up in difficult financial times. They got front row seats to watching their parents lose their jobs, struggle to pay their mortgages and, in some cases, foreclose on their homes. They also witnessed corporate greed at its worst and the government bailout of a number of companies and industries.
Graduates of college are also saddled with record student loan debt, which stands at around $1.3 trillion, and an unemployment rate that, until just recently, was high. Many college graduates are holding expensive degrees but still can’t find high-paying jobs. Those two factors influence the way current college students approach spending and managing their money.
It also impacts their attitudes when it comes to debt and living above their means. While a lot of innocent victims suffered during the financial crisis, there were also those consumers who lived way beyond their means and had no way to afford it when the housing meltdown came.
College students already adopting sound financial habits
Take the cornerstones of sound financial health: having a job, paying your bills and saving money, as one example. Sallie Mae found in the survey of 800 college students aged 18 to 24, 77 percent of survey respondents pay their bills on time while 65 percent are employed. Sixty percent never spend more than they have and 55 percent save some money each month. T. Rowe Price’s Retirement Saving & Spending Survey in June found 75 percent of millennials track expenses carefully compared to 64 percent of baby boomers. Sixty-seven percent of millennials stick to a budget compared to 55 percent of baby boomers. “A lot of these folks came of age in the wake of the financial crisis and, in turn, have adopted behaviors that promote sound credit management when they did grow up,” says Castellano.
Debt isn’t an issue with this crop of college students
But it’s not only managing their money that college students are doing a good job with. SallieMae found college students are also responsible when it comes to debt, with 63 percent paying their bills in full each month and 59 percent opening up a credit card to help build their credit profile, and not to purchase things they aren’t equipped to afford. And while people may think college students are spoiled, living off mom and dad, 73 percent pay their credit card bills themselves.
Their parents, on the other hand, aren’t doing as good a job with their debt. The New York Federal Reserve said on Twitter when releasing the latest Household Debt and Credit Report that debt held by Americans aged 50-80 increased 59 percent from 2003 to 2015. Meanwhile, Generation X, those born between the 1960s and early 1980s and sometimes called Generation debt, were borrowing the most out of all age groups before the financial crisis and still holds the title as the most indebted generation.
Growing up in tough financial times is certainly going to influence people’s money behaviors but the current crop of college students do have their parents to thank, even if their parents have their own debt to contend with. Castellano says parents are playing their part when it comes to credit cards, helping students choose the card they use and teaching the importance of living within their means. “Parents play a role in helping students understand money management skills,” says Castellano. “In a sense, they were home schooled when it comes to financial management in the wake of that crisis.” Indeed, 71 percent of respondents learned how to manage their money from their parents.
Knowledge is power and when it comes to possessing financial know-how and getting more of it, college students overwhelmingly say yes. SallieMae found 83 percent want to learn more about managing their money while 37 percent are interested in getting more saving strategies. They also want help with budgeting and paying for college, which will continue to keep them on a healthy financial trajectory as they enter their working years.
“Most college students are managing their money responsibly, conscientiously and carefully,” says Castellano. “The majority understand the value of good credit and the majority know how to get and maintain it.”