We took an informal poll last month regarding your grade in financial literacy. The majority of US adults give themselves a C or lower in money smarts. Either smart people took our poll or you think you manage your money better than you do, because the majority of the respondents gave themselves a B. See the poll results.
In light of this being the graduation season, and the fact that we ran across a survey that said students wished they learned more financial management in school, this post will be about how kids (or their parents) can become be money smart at school.
Forget the “Freshman 15.” We need to worry about the “Freshman $30,000.” The average student graduates with close to $30,000 in debt. That’s a lot of financial weight.
Students are screaming for education in how to manage their money. Some states require a class in financial education to graduate, but many do not. And just ONE class? We all know it takes more than that to get through to a teenager!
Here’s why: First-year college students required to take a financial literacy course in high school are more financially responsible than those students who didn’t take the class, a recent study found. This means they were more likely to pay credit card bills on time and less likely to go over their credit limit. Both of those add up to less debt. But just 17 states require a course. And ongoing education is critical.
Our friends at A Smarter Choice have some good tips to get students started on the right foot. Here is a scaled down version of their blog post Get Started on the Right Financial Footing.
Stay frugal. Be mindful of what you’re spending. Check with your gym, and cellphone and cable providers, to make sure you’re getting the best rates. Pack lunches from home. Have friends over for dinner and movies instead of going out.
Negotiate your pay. Starting out with a higher salary will mean higher earnings over the course of your career.
Build an emergency fund. Prepare for the unexpected by setting up an emergency savings account and have your paycheck directly deposited into that account. You should have three to six months of living expenses saved. For real.
Start saving for retirement now. If your job offers a 401(k) or similar retirement savings accounts, put money into it! Even better is if your employer offers to match a percentage of your contributions. Your 50 year-old-self will think you were super smart for doing that.
Pay down student loan debt. Know what you owe and contact your lender immediately–before the due date–if you’re going to miss a payment. Pay extra if you can.
Use credit appropriately. A strong credit history will pay off when you want to buy a house or purchase other big-ticket items (the new iPhone 6 doesn’t count). Here’s the biggest piece of advice that you don’t really want to hear: Don’t charge more than you can afford to pay off monthly! And please, pay your bill on time. Spending too much and having late payments can get you in a heap of trouble…and fast.
College students are smarter, but have more on their plate than in years past. Make financial education a requirement for them, and maybe as an adult, they’ll be shedding that $30,000 before swimsuit season.