First Things First: Money-management basics for college students

First Things First: Money-management basics for college students

July 19th, 2019 by Julie Baumgardner in Life Entertainment
Julie Baumgardner

Julie Baumgardner

Photo by Contributed Photo /Times Free Press.

The average college student will graduate with about $37,000 in student loans. Most of them don't really think about the fact that they will have to repay that money once they graduate. In fact, many college students arrive at college never having thought much at all about managing their money, much less paying off student loans at the end of their four years.

Results from a survey of 455 college students by LendEdu found that:

» 58% indicated they are not saving anything.

» 30% indicated their parents taught them nothing about managing money.

» 51% received no financial education in high school.

» 43% are not tracking their spending.

Bryan Bulmer, coordinator for financial wellness at the University of Tennessee at Chattanooga, knows this all too well. He has worked with college students to help them learn financial literacy.

"There are two kinds of students I typically see in my office: students who have been taught about money management and have grasped the concepts, and those who really have never been shown the impact of money or lack thereof," says Bulmer.

In his student presentations, Bulmer uses a giant Jenga game to show the impact of frivolous spending. For example, buying that cup of coffee each day Monday through Friday is about $100 a month. Doing that for four years, the student will have spent $5,000 on coffee alone.

"That usually gets their attention because nobody ever thinks about how much that small amount adds up to over time," Bulmer says. "Our goal is to help them know how to be wise with their money."

When Bulmer asks students, "How many of you want to move back home after college?" he says not a single hand goes up, but 60 percent of them do move back home. Plus, a whopping 39 percent of them will still be living at home into their mid to late 20s.

Studies show that annual take-home pay for the average recent college graduate is around $36,000. Bulmer breaks this down for his students this way: If you have a car, college and credit card payments, that will probably take about $1,000. That leaves you $2,000 for everything else including rent, which is usually another $1,000. So that leaves you only $1,000 for groceries, car insurance, internet and such.

"Pretty quickly the students begin to realize that while it sounds like a lot of money, it really isn't if you don't learn how to manage it well," Bulmer says.

If you want to help your college student be financially literate, Bulmer offers the following suggestions:

» Involve the student in the family finances. Let them see what it takes to keep the lights and water on, the cost of Wi-Fi and keeping the refrigerator filled with food.

» Talk with them about how credit works. Credit card companies are notorious for stalking college students with deals that are too good to be true, and plenty of them fall for it only to find themselves in debt way over their heads with no idea how to get out.

» Teach them the basics of money management (e.g. banking, paying bills, safe use of debit cards, MobilePay, ID theft and such).

If your student is taking out student loans, make sure they know what this means in four years. Some students are not aware that they have student loans. This should not be a surprise to them when they graduate.

Most agree that having a college degree gives people an advantage. According to the National Financial Educators Council, studies show college graduates will earn almost a half-million dollars more over their lifetime than someone who has not received their college degree. But if they have no concept of personal finances and how to manage the money they are earning, it will be of no benefit to them.

"All of our students who come into our office that are financial literate give credit to their parents for helping them be literate," says Bulmer. "Statistical information says 34 percent of students feel financially literate and 37 percent of parents share financial literacy skills with their students. I believe those numbers show parents are the No. 1 provider of financial literacy skills in the lives of their children."

Give your kids the edge they need for future success by teaching them how to manage money wisely now, regardless of their age.

Julie Baumgardner is president and CEO of family advocacy nonprofit First Things First. Email her at julieb@firstthings.org.