Students just starting college often have little or no knowledge of the most basic financial planning concepts. Yet failing to instruct college-bound children on personal financial management can lead to serious problems -- the most dangerous of which could be mounting credit-card debt.
Resources for students and parents on everything from smart savings strategies to seeking out low interest-rate debt have grown tremendously in recent years. Parents and students today can look to their financial aid officers, youth magazines or online for financial advice.
Lack of financial savvy isn't a new problem among college students. But today's harsher economic climate has increased the need for tight budgeting. Additionally, easy access to credit cards on campuses makes ignorance more dangerous than ever because students easily can ruin their credit history.
According to a July survey by student-loan agency Nellie Mae, 83 percent of college students had credit cards in 2001, up from 67 percent in 1997. While average debt levels dropped in 2001 to $2,327 from $2,748 the year before, more than 27 percent of students had balances that exceeded $3,000, compared with 22 percent in 2000.
Meanwhile, financial awareness among young people may even be deteriorating. The average 12th grader scored 50.3 percent -- a failing grade -- on a financial literacy test provided by the JumpStart Coalition for Personal Financial Literacy this year. That is down from 51.9 percent in 2000 and 57.3 percent in 1997.
"When I was young, and I ran out of cash, that was it," said Dara Duguay, executive director of JumpStart, a youth-oriented financial education program. "Today, if young adults want to live beyond their means, credit cards provide a very easy way to do that."
Fortunately, resources that provide students with basic financial guidance are abundant and appear to be growing. Students can usually get free advice right on campus from their financial aid officer, from online youth organizations or from their campus credit union.
Parents whose children departed home without any financial savvy can help by sending information. Finding the right resources is vital because sometimes parents don't know the rules, Duguay said.
Financial aid officers, once thought of simply as the finders of loans and grants, often can provide guidance on many aspects of one's financial life, said Dallas Martin, president of the National Association of Student Financial Aid Administrators, a trade group for financial aid workers in Washington.
Paying for school and budgeting, "they tie together," Martin said. As a result, many financial aid officers today offer budgeting lessons and advice on how to increase income, he said.
The weak economy has increased the need for financial guidance.
"There's a lot of pressure this year, more than I've seen in the past," Martin said. Students are watching their college funding decrease as state budgets tighten and parents lose jobs. If the financial aid officer cannot find students additional funding, he or she might be able to land them a job or help them cut back spending.
Campuses today also are much more likely to offer financial guidance during freshman orientations or through free written materials. The National Endowment for Financial Education, a publisher of financial educational materials, has brochures that it delivers through programs such as the United Negro College Fund and the American Indian College Fund. Topics range from basic tutorials about balancing a checkbook to advice on the dangers of online gambling and identity theft, said Brent Neiser, director of collaborative programs.
Campus credit unions can be a great place for students seeking a credit card or other type of loan because they typically offer higher rates on deposits and lower rates on loans. Additionally, they tend to provide "education along with that credit card" and can be stricter in requiring the borrower to prove a source of income, said Gregg Baird, chairman of the Campus Credit Union Council in Washington.
Not all colleges offer a credit union, but about 12 of these lending and banking institutions are run by students, according to Baird. Increasingly, colleges are asking credit unions to participate in freshman orientation with advice about credit-card debt, said Baird.
Subscriptions to money magazines geared toward a young audience can make great gifts for dorm-ridden students. Young Money magazine, www.youngmoney.com, started by a credit counseling trade group, publishes stories about everything from paying off student loans to finding scholarships and financial aid.