Many college students find they lack greatly when it comes to being financially literate.
Startling new numbers concerning financial literacy recently came out of a survey conducted by the American Institute of CPAs. The survey concluded only 39 percent of college students have a monthly budget. Professionals suggest students learn to become more financially literate now to prepare for their future.
Tracie Nobles of the AICPA’s financial literacy commission found it surprising that, although the students surveyed found having financial literacy skills important, 48 percent, sometime in the last year, had less than $100 in their bank accounts.
“They understood the importance of financial responsibility, but they were potentially having problems in understanding how to create a budget or understanding how to create a safety net in their checking account,” Nobles said.
Jim Brau, a finance professor at BYU, emphasized the importance of having a budget and being educated in financial matters as a student, as well as the dangers of having a credit card.
“Where there is no vision, the people perish,” Brau said, referencing Proverbs 29:18. “If you don’t have a vision of what you’re doing with your money and what you’re supposed to be doing with your money, it is tough.”
“Whether you write the budget down or whether you use the envelope system where it’s just cash, having a budget is super important,” Brau said.
Brau said a big problem for college students is spending too much on food. Students who don’t keep a budget often go out to eat more often than they should. Brau said college students can still go out but must stay within their limits.
“If you budget, you can do it wisely,” Brau said.
He also discussed credit cards. He said they could be either a powerful tool, or a problem, depending on how much self discipline you have. He advised to use it like cash and to pay it off fully every month to avoid paying interest rates.
Brau said financial literacy is very important, and every student should take a personal finance class. He even said he believes a personal finance class should be mandatory. He suggested two personal finance classes that students at BYU could take for credit: Finance 200 and SFL 260.
Students who take these classes will learn many financial skills, including how to budget correctly, how to buy a house and what kind of insurance to have. Students will also learn what the apostles and brethren of the church have taught about personal finance.
“We do it in a spiritual context because this is BYU,” Brau said.
Alex Burt, a finance major at BYU, also agreed it is very important that students are financially literate. Burt said as a student, you have to plan ahead with your money.
“Think before you buy things,” Burt said. “Make a list before you go to the grocery store, or before you make a big purchase, think about how you are going to finance it.”
Burt said having a budget is very important for college students, as well. He keeps an excel spreadsheet of his income and expenses.
“If you don’t look at how much you’re spending per month, then you are not going to be fiscally responsible,” Burt said. “You’ll spend everything you get and you’ll never save anything.”
Burt does carry a credit card, and said they are great to start building a credit score, but you have to be careful with them.
“I think credit cards are important,” Burt said. “But I also think it’s important to pay it off as soon as you make the purchase.”
Burt admitted it can be hard when you don’t have a steady income.
“A lot of us are poor college students, and that is how it is going to be,” Burt said. “Realize your limits.”
Only 23 percent of students surveyed in the AICPA study said they sought out information or help on their personal finances. Several sources are available for BYU students who want to become more financially literate, or need help with their personal finances.
Dr. Bryan Sudweeks, a professor of finance at BYU, created personalfinance.byu.edu. This website offers students personal finances lessons of all levels online. It is the equivalent of the BUSM 418 class that BYU offers, a finance class for non-finance business majors.
Another resource for students is the Student Center for Financial Management and Planning in the Wilkinson Center. The center’s website outlines its goal to help each student to wisely assume responsibility for their own financial well-being.
Nobles suggested students go to the AICPA’s 360 Degrees of Financial Literacy website or feedthepig.com to learn more about how to handle their finances. Both websites offer tools to track spending and become more educated on finance.
Burt agreed that students should start learning about investments and fiscal responsibilities now, so they are prepared in the future.
“When you do eventually go out and get a career, you’ll understand those principles and start saving as soon as you get a real job,” Burt said. “Then you’ll be well to do by the time you’re retired.”