Topics Parents Should Cover to Help College Student Gain Financial Literacy
Paying for a college education requires a lot of financial planning. Most parents
begin thinking about how to finance college many years before a student is ready to
embark on a college career. Your college student may or may not be involved in this
planning, but whether or not your college student is involved in the bigger financial
issues such as tuition and other college expenses, it is important that your student
become financially literate in order to survive financially during and beyond the
A growing national problem
Financial literacy involves the ability to read, manage, and communicate about personal
finances and to have the skills and knowledge to make competent financial choices
about banking, credit, insurance, taxes and investments. How does your student stack
up? Most high school graduates don't do very well. High school student spending may
create an unrealistic lifestyle. Iowa State University tested high school seniors'
understanding of money management. The average score was a 57% a dramatically failing
Some high schools and colleges offer courses in financial management, and some states
even mandate personal financial literacy as a high school graduation requirement.
However, in a 2005 study of student financial planning, 70% of students said that
that the most significant influence on their money management came from parents. The
same study indicated that as a group, college students are more likely than other
age groups to avoid bad checks and to pay bills on time. However, they are least likely
to save monthly, to have a budget, or to balance a checkbook. Clearly there is room
Lack of knowledge concerning money management can land college students in trouble
in several ways some of them unexpected. According to a national study conducted
by Sallie Mae, more than 84% of college students have credit cards and nearly 20%
of students graduate with a balance of more than $7000. The average debt of graduating
seniors was $4100, up 41% since 2004. Perhaps most important, however, is that concern
about finances can affect a student's academic performance, mental and physical well-being,
and ultimate employment choices. According to Noel-Levitz, in 2009 nearly 30% of students
said their financial problems were distracting and troublesome enough to affect their
lives negatively. The National Council on Family Relations found that student financial
behavior got worse the longer students were in school. In their study, 78% of seniors
had credit card debt compared to only 49% of first year students. 49% of seniors said
they failed to pay credit card balances in full, while only 29% of first year students
failed to pay balances.
What parents can do?
Talk to your student about budgeting. Much of the concern about college student finances has focused on student credit
card debt. As a college parent (or future college parent) you should certainly talk
to your student about appropriate uses of credit cards. However, there are several
other important topics that parents can cover with their students to help prepare
them for eventual financial independence.
Parents can help students to understand that many small, daily decisions can affect
a student's total financial picture. Here are twelve topics we suggest that you discuss
with your college, or college bound, student. Don't try to cover these all at once,
but open the door and begin to discuss these topics and help your student practice
skills in these areas early and often.
Income net vs. gross
Realistic living expenses
Importance of savings and/or emergency fund
Frugality and making ends meet on a limited budget
Appropriate use of credit cards interest charges, finance fees
Importance of credit history and credit score
Work benefits insurance, retirement, etc.
That's a lot of topics, and it can seem overwhelming at first. But don't try to cover
them all at once. Ask your student how much he wants to learn. You may be surprised
at how open and eager he is to learn what you can share with him. Students often indicate
they want to learn about practical financial matters and they say they believe that
their parents should teach them. Remember that you'll not only be teaching your student
practical skills, you'll also be sharing family values with him.
Of course, the earlier you start sharing financial information with your student,
and giving him the opportunity to practice his skills, the more you can cover and
the better armed he will be. However, it is never too late. Once your student has
experienced the new found freedom of college, and the important decisions he will
face as part of that freedom, he may be even more receptive than ever to some practical
information and advice. Remember that, as in so many other areas, your student may
or may not act on your advice right away. He will, however, be armed for the future.
There are many good resources on the web to help you as you cover these topics with
your student. Both you and your student can find helpful information and guides. Here
are a few of our favorites. Use them as a jumping off point.
Sam Houston State University Student Money Management Center http://www.shsu.edu/~smmc/
Jump Start Coalition for Personal Financial Literacy http://www.jumpstart.org/
Cheap Scholar http://cheapscholar.org/2011/04/28/top-ten-best-student-financial-literacy-resources-on-the-web/