UWire
Conventional wisdom says young people have a lot to learn when it comes to managing money, but the reality is most American college students are handling their finances carefully and conscientiously, according to “Majoring in Money: How American College Students Manage Their Finances,” a new national study from Sallie Mae, the nation’s saving, planning, and paying for college company, and Ipsos, an independent global market research company.
Taking the Right Steps
“Majoring in Money” compiled the results of online interviews of 800 college students between the ages of 18 and 24, and reveals students are taking the right steps when it comes to managing money. More than three-fourths (77 percent) of college students pay bills on time; six in ten (60 percent) never spend more money than they have available. In addition, college students are putting money aside each month. More than half (55 percent) save at least some money every month, and 24 percent report having an emergency fund.
Responsibly Using Credit Cards
While most college students make purchases with debit cards (85 percent), cash (86 percent), and mobile payments (77 percent), more than half–56 percent–have at least one credit card. In fact, roughly six in 10 (59 percent) report their primary reason for getting a credit card was to build their credit history. “Majoring in Money” also finds that the majority of students with credit cards are using them responsibly and paying the bill themselves. Specifically, 63 percent pay the balance in full each month, and 73 percent pay the bill without assistance from a parent or other adult. Roughly seven in 10 (69 percent) report an average monthly balance of $500 or less.
“Having a credit card doesn’t necessarily mean students are overspending,” said Julia Clark, senior vice president, Ipsos Public Affairs. “The reality is they are demonstrating sound reasoning and thoughtful decision-making, and they are managing their payments effectively.”
Understanding Credit Benefits and Behaviors
“Majoring in Money” finds most college students understand the value of good credit, and the majority know how to get and maintain it. Nine in 10 college students (91 percent) know having a good credit record can help them qualify for different types of credit and improve their access to favorable interest rates. The majority know paying bills on time (93 percent) and keeping credit balances low (63 percent) are positive credit behaviors, and opening multiple credit accounts simultaneously (64 percent) and using as much credit as possible (61 percent) are negative credit behaviors.
“It’s clear that today’s college students are focused on effectively managing their finances,” said Raymond J. Quinlan, chairman, and CEO, Sallie Mae. “Many of these young people grew up in the wake of a financial crisis and, in turn, have adopted behaviors that promote sound credit management. At the same time, they are eager to learn more to continue on the road to financial stability and success. With free tools and resources to help students better understand credit and benefits such as free quarterly access to FICO scores, we have the opportunity to help them do just that.”
Looking to Learn More
While the majority of college students express confidence in their current money management skills, 83 percent would like to learn more, especially about saving and budgeting. “Majoring in Money” also reveals college students would benefit from additional education on specific credit topics, including how interest accumulates and how repayment behavior and credit terms affect the cost of credit over time. In fact, when asked to answer multiple choice questions on those topics, only 31 percent answered all three questions correctly.
For the complete report, infographic and video visit Sallie Mae website.