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Updated on Wednesday, September 10, 2014
Debt among students has reached astronomical levels. While much of a young person’s debt stems from student loans, young adults are also plagued by car loans and overwhelming amounts of credit card debt. According to the Wall Street Journal and data compiled by analyst Mark Kantrowitz, the average 2014 graduate will carry a whopping $33,000 in student loans. Annual tuition increases will cause student loan debt to continue rising, making it difficult for students to lead a healthy financial life after college.
This high-debt burden has led students and researchers on a quest for a solution that’s all too obvious: financial literacy. The best way to curb debt later on in life is to learn basic financial lessons and debt management strategies before college. Understanding how to budget, the impact of compound interest, how credit cards work and how to save money on simple financial products could save young adults thousands of dollars. ?
It’s important now, more than ever for colleges to start incorporating financial literacy courses into the mandatory curriculum.
Recently, the MagnifyMoney team went to Brooklyn College to host a two-hour seminar covering the basics of personal finance. The workshop attracted nearly 45 inquiring minds, who were not required to attend by a professor or course requirement. Judging by the plethora of questions asked throughout, and even after, the presentation, today’s college students desperately need more information about personal finance.
Workshop attendee, Jamal Charles said that he was elated to take advantage of an opportunity to increase his financial literacy. His personal dilemma with finances occurred last semester when he was forced to pay for school out of pocket.
“I would usually get financial aid, but unfortunately I didn’t qualify that semester,” Charles explained.
This unexpected expense put restrictions on his day-to-day purchases, making it difficult for him to afford food and transportation. Like a majority of students, Charles earned a small salary from his job interning at a local tax preparation office. Even though he only brought in minimum wage, Charles tried to refrain from taking out additional loans.
?“I found myself stretching my budget while on a very limited income. If I knew better, I would have had an emergency fund, and use that to pay off that semester,” he said.
After attending MagnifyMoney’s Financial Literacy workshop, Charles says there are a number of things he’s going to start doing differently.
“The workshop introduced great budgeting strategies that I was never aware of. I also had no clue that the monthly maintenance fee on my checking account could be waived. I’m definitely going to look over MagnifyMoney’s list of fee-free checking accounts and switch as soon as I can.”
Liana Melendez, a Brooklyn College junior opened up about her credit card debt woes.
“Credit card debt was something that I’ve always carried with me, and I didn’t expect to get out of debt anytime soon, until now.”
After MagnifyMoney’s workshop, Melendez understands the effect of compounding interest and how to use balance transfers. Melendez now feels empowered to take control of her financial situation.
“It’s insane the difference that knowing can make. There was a time when I had to use my credit card in an emergency, and I’ve been paying for that emergency for months now. If only I knew more about compounding interest then, I probably would have never used my credit card. I’m glad I learned about balance transfers, now I can pay off my debt without having to worry about paying interest to the bank,” said Melendez.
Prior to the workshop, Melendez also didn’t know what her credit score was, how to find her score or why it was even important.
“You know, no one ever sat me down to explain the significance of a credit score. I do want to buy a home one day, and I may want to qualify for an auto loan pretty soon,” explained Melendez. “My credit score right now probably isn’t prime, but now I know how to get it there, and that’s what’s important.”
There’s no trick to leading a healthy financial life. The solution to preventing students from falling into a black hole of debt lies in educating the masses about basic financial literacy. The students at Brooklyn College proved even a two-hour seminar covering the basics can help get young adults on the right track.