Though there is a lot of information to indicate that young adults face big financial challenges, a research firm recently found that a majority of college-age students pay their bills on time, live within their means and save. The best news is the great majority (83%) of young adults want to do better with money management!
Sallie Mae, which provides a massive amount of student loans, worked with research firm Ipsos to interview 800 college students between the ages of 18 and 24, and discovered these findings:
- 77% pay their bills in a timely manner
- 60% always spend within their means
- 55% manage to save money every month
- 83% say they would like to learn more about specific aspects of money management
This is more positive news considering the heavy student loan burdens many young people in their 20s and 30s are facing.
Other studies report that in addition to facing the biggest student loan debt of any U.S. generation to date — $1.4 trillion worth — a majority cannot answer basic financial questions. But this new study is positive news that young adults do care about finance, want to learn and have the ability to turn things around.
Responsible credit card use
Over half of college students make purchases with credit cards, compared or in addition to debit cards, (85%), cash (86%) and mobile payments (77%). The biggest reason cited by students to open a credit card account was to build credit history. A majority (63%) are paying the bills in full each month, while 73% said they pay their bills without help from someone else such as a parent. About 69% of college age students reported they had a balance of $500 or less.
Julia Clark, senior vice president, Ipsos Public Affairs said, ‘Having a credit card doesn’t necessarily mean students are overspending. The reality is they are demonstrating sound reasoning and thoughtful decision-making, and they are managing their payments effectively.’
Are you smarter than a college student?
So, are you smarter than a college student? A third of people between the ages of 18 and 24 could not answer these basic questions:
1. Suppose you had $100 in a savings account and the interest rate was 2% per year. After five years, how much do you think you would have in the account if you left the money to grow?
- A) More than $102
- B) Exactly $102
- C) Less than $102
2. Assuming the following individuals have the same credit card with the same interest rate, which will pay the most in interest on their credit card purchases over time?
- A) Joe, who makes the minimum payment on his credit card bill every month
- B) Jane, who pays the balance on her credit card in full every month
- C) Joyce, who sometimes pays the minimum, sometimes pays less than the minimum, and missed one payment on her credit card bill
- D) All of them will pay the same amount in interest over time
3. Imagine that there are two options when it comes to paying back a loan and both come with the same interest rate. Provided you have the needed funds, which option would you select to minimize your total costs over the life of the loan?
- A) Option 1 allows you to take 10 years to pay back the loan
- B) Option 2 allows you to take 20 years to pay back the loan
- C) Both options have the same out-of-pocket cost over the life of the loan
If you answered A, C, A, — congratulations, you are smarter than a college student. (Questions from Yahoo! Finance)
And here are some resources to make sure you understand each question and answer:
- What is compound interest?
- â€‹Paying off credit card debt
- 5 things to know about paying off your loans