High School Graduates Lack Skills to Manage Finances
Sam Casarez, TG Senior Regional Account Executive

Financial aid professionals have long realized that a key component of their jobs is to provide students with the money management skills needed to make it through school and beyond.

However, new research shows that instituting financial literacy counseling programs on campuses is critically important because a vast number of today’s high school graduates are heading to college with very little concept, if any, of how to manage money.

The latest test administered to high school seniors by the Jump$tart Coalition for Personal Financial Literacy actually showed a worsening problem. In the most recent test administered in 2007 to more than 6,800 high school seniors in 40 states, only 48 percent responded correctly to basic financial questions. In 1997, when the test was first administered, 57 percent answered correctly.

The Jump$tart Coalition test showed that the majority of high school seniors fail to grasp even the most basic of financial concepts. For example, only 42 percent understood that sales tax actually adds to the cost of a purchase. Less than 49 percent correctly said that someone who pays the minimum amount on a credit card will pay more in finance charges than someone who pays the entire balance.

Laura Levine, executive director of Jump$tart, said that research shows that the young age of those surveyed is but one factor in their inability to grasp basic money management concepts. She said that problem-solving skills are also important in their ability to understand and apply financial information.

The data poses a serious concern for financial aid professionals who are scrambling to establish or expand on-campus financial literacy programs. Financial aid offices regularly field questions on a variety of rudimentary financial skills, including how to budget or how to build good credit. And a growing number of financial aid officers have begun connecting financial literacy with a student’s long-term ability to thrive in college and in a career.

Paul Goebel, director of the Student Money Management Center at the University of North Texas, said the majority of college students carry loan debt that will extend for years after graduation. Learning to properly manage that debt also prepares students for life’s important long-term decisions.

“Research has shown that as debt from the college years increases, graduates postpone major life milestones including marriage, home ownership, even children,” he said.

The most effective financial literacy counseling involves assessing an individual student’s financial skills. The key is to remind students that there must be a commitment — whether in time, money, or lifestyle change — to succeed financially.

More colleges are now offering financial counseling services to students, or even requiring mandatory courses on academic skills and money management. These services are very timely, considering that student loan debt has doubled over the last decade.

Many incoming freshmen quickly realize that financial aid usually does not cover all of their college and living expenses, and that working part time may not necessarily offset extra costs. That’s the point where students can take the first step to becoming independent money managers, especially if helped along by financial literacy counseling services on campus.

Sam Casarez is a Senior Regional Account Executive with TG serving schools in TASFAA. You can reach Sam at (800) 252-9743, ext. 4655, or by e-mail at sam.casarez@tgslc.org. Additional information about TG can be found online at www.tgslc.org.