Before collegians take their first step onto a college campus, many of them already carry significant financial responsibilities associated with their daily lives. As a university administrator, I see this first hand in my interactions with parents and students.
Students come from varied backgrounds. Some pay for college on their own and handle the expenses of daily life, while others have heavily involved parents with more financial means. Regardless of their status, students experience a newfound independence and a higher level of financial responsibility once they enter college. For many teenagers, this is their first exposure balancing a number of expenses, such as housing, food, and tuition.
So why should the financial literacy of students be on the mind of a university administrator? Students can relieve some of the stress associated with juggling academics, work and finances by having a general understanding of personal finance. In turn, this knowledge allows them to focus on the studies and co-curricular activities that will prepare them for the rest of their lives.
A recent survey of seniors at Misericordia University (including traditional students in their fourth year but preparing to enter graduate programs) revealed that 22 percent of them work on campus for pay. Sixty-seven percent work additional hours off campus as well. It is important for our young adults to have a set of financial literacy competencies when you consider the complexities of holding a part-time job and allocating that income responsibly.
Junior Achievement USA recently released findings from its Teens and Personal Finance Survey. It found that three out of five teenagers between the ages of 13-17 still use cash as their main form of payment. These same consumers then may receive their first exposure to credit cards when they get to college. Knowing the basics of personal finance will help them avoid the pitfalls that come with credit and will let them enjoy the benefits and flexibility that come with saying, “charge it.”
It is not surprising that one-third of the young adults surveyed thought more than 40 percent of their income would go to taxes, a rate much higher than the national average of 31.5 percent. Of course, for younger workers the tax rate is typically even lower. Surprisingly, only about one-third of them had heard about retirement planning. Learning to save for the future early can help ease financial pressure later in life.
Although I am far too old to be included in the survey, I am certain my answers as a teenager would have been inaccurate. Students in high school and college need to know useful information about their future income, savings, taxes, and spending habits.
Another data point from the survey is also noteworthy. Junior Achievement asked teens about their income expectations for their first job. Based on the results, 47 percent of them believe they will earn less than $35,000, while 28 percent believe they will make more than $35,000. A full 22 percent were not sure where their income would fall.
The median income for a high school graduate in his or her first job is around $30,000, according to the federal Bureau of Labor Statistics. For a college graduate, it is about $50,000. At Misericordia, our Insalaco Center for Career Development works closely with students as they plan for life after graduation so they also understand their potential for future career earnings.
Early efforts, even before high school, can help establish financial literacy for our children. Parents can start teaching their children about personal finance at an early age through simple means. Set up a savings account, for example, so they can see and understand the importance of saving, and guide them through the simple purchases they make on their own. Even the strategic use of a weekly allowance to show the difference between work for pay and chores done for the common good of the household can be a memorable life lesson.
Getting involved with organizations such as Junior Achievement of Northeastern Pennsylvania is another way to help. Junior Achievement’s in-classroom programs on career preparation and financial literacy rely on volunteers from the community. Modern-day parenting can be complex, but I suggest we add financial literacy to the checklist as it will pay off in rewards for our children for the rest of their lives.
THOMAS J. BOTZMAN is president of Misericordia University.