Of all the life skills that someone entering adulthood could lack, that financial literacy tests tend to hit hardest. Higher One and EverFi came out with a report called “Money Matters on Campus.” They felt an alarming disconnect between adults who were taking out loans for college and the skills needed to handle it.
The fact that over 70 percent of students take out loans to go to college only exacerbates the problem. In this report, over 42,000 higher education students across the board – both from four-year and two-year colleges were surveyed. Survey topics are covered included basic financial literacy tests such as school student loans, savings, credit cards, and banking. This is the latest installment in a series they have been coming out with every year since 2012.
Literacy Test: The Problem Gets Worse
To make matters worse, most respondents had experience with credit cards, bank accounts, and student loans. What is on the decline each year is what is called “responsible planning behaviors.” These behaviors include basic budgeting skills and account reviews.
It doesn’t help the students who are getting loans without ever having the plan to pay them back. In fact, student loans are becoming such an issue for that very reason. Students are given loans without any thought as to creditworthiness or whether the student will have the ability to pay the loan back.
In the past two years with this study has been administered, the number of students who are reporting these responsible behaviors declined sharply. Other responsible behaviors may include paying bills on time, paying off credit cards, following budgets to limit spending, or even reviewing bills. The number of students who knew how to balance a checkbook or enough about their finances to do so is also on the decline.
Let the Literacy Test Statistics Speak for Themselves
What was interesting to find is that more students in two-year colleges exhibited behaviors that were considered financially responsible than those in four-year colleges. For instance, 53 percent of students from two-year colleges kept receipts. Half of that – only 25 percent of students from four-year colleges did the same. While 83 percent of students from two-year colleges checked account balances, their four-year counterparts didn’t do the same – only 62 percent of four-year college students checked account balances on a regular basis.
The biggest statistic that’s most alarming is that only 39 percent of four years college students use a budget. The rest didn’t really seem to care or even know what a budget was. From the students who attended two-year colleges, this number almost doubles to 60 percent. If there is one life, a financial skill that parents are not teaching their children is how to keep a financial budget and limit spending when necessary.