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Students lack savings smarts

By David McMillin · Bankrate.com
Saturday, April 20, 2013
Posted: 6 am ET

As the costs of education continue to increase, it looks like parents need to educate their soon-to-be college students on the basics of smart personal finance strategies.

A new survey by the Credit Union National Association reveals that nearly 50 percent of high school students do not understand how much money they will need to pay for college. With more than 800 respondents ages 17 and 18 participating, 83 percent indicated they don't know their borrowing rates, and 70 percent said they don't know the duration of their expected or existing loans.

It appears that most of them hope they won't have to worry about them. As many as 70 percent of respondents said they expect to find high-paying jobs.

"These troubling findings suggest not just a lack of awareness of college cost or how debt works but also a lack of basic financial knowledge," Paul Gentile, CUNA executive vice president of strategic communications and engagement, said in a statement. "The results suggest that some students could be challenged in managing basic expenses or using such payment tools as credit cards in a consistently responsible manner as they enter adulthood."

Gentile makes a great point: College students need more than a tutorial of interest rates on their student loans. They also need to recognize the value of establishing good saving habits and of spending less. While the majority of respondents believe they will be able to secure high-paying employment after college, that's a hopeful expectation. Anyone in today's job market knows it's not a sure bet.

For parents, these results should reinforce the importance of helping children take smart steps toward their financial futures. Plenty of banks and credit unions offer savings accounts designed for teens, and free budgeting software can help kids understand how to effectively manage their own money.

Do you have children who will be heading to college soon? What have you done to ensure they understand how to manage their personal finances?

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