By Courtney Steadman,
Guest Columnist & DMACC Honors student
Money plays a huge role in everyone’s life. In society today, people cannot go one day without interacting with money. However, despite all of the monetary experience people get from day to day, many still do not know how to use their money wisely. Because college students make financial decisions that will affect them for years after they graduate, they need to make wise decisions.
To get an idea of how many individuals are financially literate, S&P Global conducted a Global Financial Literacy Survey in 2014. The United States ranked fourteenth. According to their survey, S&P Global found that 57 percent of adults in the United States are considered financially literate, which means they are able to understand how money works and make wise financial decisions. The survey clearly shows that adults in the United States are lacking the financial education they need. If 43 percent of adults in the United States are not financially literate, how can we expect students right out of high school to make life changing financial decisions?
The lack of financial knowledge is why individuals take out more student loans than what is necessary and rack up enormous amounts of credit card debt. The average amount of student loan debt for graduates of the class of 2015 was just over $35,000 (Sparshott). Generally, students resort to student loans to fund their education because they are so accessible without necessarily needing them. The amount of student loans that a student is eligible to take out is generally more than the cost required for attendance. Student loans and credit cards should not be used to live an lifestyle that is out of the student’s means. “Live like a student while you are in school, so you don’t have to live like a student after you graduate” (“Can I Use My Student Loans to Pay for Living Expenses?”).
A few simple strategies while in college will help students not be as overwhelmed by loans once they graduate. First, students must pick the school that will provide the best education at an affordable cost. Students should always consider community colleges. Even if a student wants to get a bachelor’s degree, a two-year school can be the best place to start. When students transfer to a university from a community college and complete their bachelor’s degree, they receive the same degree as the student who went to the university all four years. However, the students who transferred paid less for the same degree.
Once students begin taking out student loans, they should keep track of the total amount that they are borrowing from semester to semester. It is easy to keep taking out student loans without seeing the total amount add up. When students know how much they have already borrowed, they will be more conscious about the number of student loans they take out in the future. Another great tip that more college students should do is make payments on their student loans while in school. Just because individuals are not required to start making payments until six months after they stop attending school does not mean they cannot make payments before. Also, individuals should calculate what their estimated loan payment will be before they enter repayment, so they will not be shocked.
There are also little ways students can save money. It is important for people to start small and work their way up to their goal. Students should start by re-evaluating their budget and cutting out unnecessary expenses. Students should stop buying expensive coffee drinks. Spending roughly $5 a day on a drink from Starbucks quickly adds up. Students should also shop at second hand stores, such as Goodwill and Plato’s Closet. Once students no longer want certain clothes, students can try selling them back to stores like Plato’s Closet or through apps like Mercari for a little extra spending cash. Small similar actions will allow students to quickly become in charge of their own finances.
The United States has fallen behind of other countries when it comes to its citizens being financially literate. Financial literacy is such an important concept in our society because it is involved in numerous daily decisions, so it deserves the nation’s attention. For the United States to catch back up with other countries, students must be provided with the financial education and tips that are required to make wise financial decisions. Students should consider taking a personal finance class or meeting with an expert at their local bank to receive financial literacy training that will benefit them for years to come. Once these changes are made, the number of citizens who are considered financially literate will increase and students will not feel so overwhelmed by student loans.
Courtney Steadman is from Perry, Iowa. She will graduate with honors from DMACC in December and transfer in spring 2018 to Iowa State University, where she will double major in accounting and finance. Her goal is to become a Certified Public Accountant.