September 18, 2015 1:07 am
According to a recent survey by the American Institute of CPAs (AICPA), college students give themselves good grades for financial literacy – but many lack knowledge of the basics. Specifically, 57 percent of students surveyed rated their personal financial management skills as “excellent” or “good,” but 48 percent reported having less than $100 in their bank accounts in the last year.
“For many students, college is their first time making independent financial decisions,” says Ernie Almonte, CPA, CGMA and chairman of the AICPA’s National CPA Financial Literacy Commission. “With this opportunity comes serious responsibility, and if they aren’t making informed, intelligent decisions, it can have a negative impact on the rest of their financial lives.”
Nearly 40 percent of students surveyed reported borrowing money from family or friends and just over 10 percent reported missing a bill payment in the last year. To boot, only one in four college students say they seek out personal financial management information and incorporate it into their spending and saving habits.
Members of the AICPA’s Financial Literacy Commission say that establishing and following a budget is one of the most important things a person can do to take control of their financial situation and build for the future. Other steps to take include:
Reviewing your plan – Look at your budget on a monthly basis and see if there are differences between your budget and your actual spending. If there’s a gap, determine if your budget or spending needs to be modified.
Building a credit score – It's a good idea to start to establish a positive credit history by having a credit card in college. But it’s critical that you don't use it unless you can pay it off, or if it’s an absolute emergency.
Setting a goal for earnings – Figure out how much money you’ll need to get through the semester for expenses like cellphone service, transportation costs (i.e. car payment, insurance, bus fare, etc.), and rent and utilities if you're living off campus. Use that as a goal for how much money you’ll need to save working over the summer in order to start the semester from a position of financial strength.
Published with permission from RISMedia.