New Research Indicates College Students are Handling Money More Responsibly
Most American college students are handling their finances more carefully and conscientiously, according to a new study by Sallie Mae and Ipsos. The study found 77% of college students pay bills on time, and 60% never spend money they don’t have. Also, more than half (55%) save money each month, and 24% have an emergency fund.
The study, entitled “Majoring in Money: How American College Students Manage Their Finances,” interviewed 800 college students between the ages of 18 and 24.
Today’s college students are also using credit cards responsibly. Most purchases are being made with debit cards (85%), cash (86%) and mobile payments (77%), but most college students (56%) have at least one credit card. 59% of those with cards said the primary reason they obtained the credit card was to build credit. 63% of these students are paying their balance in full each month, and 73% pay without assistance from their parents. 69% have 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.”
College students seem to understand the importance of good credit. 91% know they must have good credit to get favorable interest rates when they’re ready to buy cars or homes. They also know paying bills on time (93%) and keeping low credit card balances (63%) will have a positive impact on their records, while opening multiple credit card accounts simultaneously (64%) and using as much credit as possible (61%) will have negative affects.
“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.”
There is still a hunger and need to learn more. 83% of the survey respondents said they would like to know more about saving and budgeting. They certainly need to learn how interest accumulates and how repayment behavior influences cost of credit over time. When asked multiple-choice questions about those topics, only 31% could answer all three correctly.