College student spending habits

6 surprisingly common student money misconceptions

BY SAMUEL DODOBI NAR-OKUNOR

From sports teams and extracurricular clubs to first jobs and first cars, high school students learn new lessons every day, many away from the classroom. But when it comes to balancing their obligations, many students learn some tough lessons for the first time as they dip their feet into adult life, particularly with their finances.

"Only 7 percent of high school students are financially literate and fewer than 30 percent of adults report being offered financial education at school or college," said Brian Page, finance teacher and personal finance adviser to H&R Block Budget Challenge. "Personal finance can be an overwhelming subject to learn, so many students have developed money misconceptions."

According to Page, many students share these six common misconceptions when it comes to money:

 1.Left Over Saving 

A person can save what is left over at the end of the month. Those who save by making automatic savings deposits right from their paycheck save four times more than those who only deposit directly into one account, according to CFED.org.

2. College is unaffordable.

 Most teens are well aware of the surge in college costs. However, many teens don't realize that, by comparison shopping, seeking financial aid and looking at alternative pathways to earning a degree, college costs can be more manageable.

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3. All debt is bad. 

"Borrowing now to improve your future self can be a good idea," Page said. "Student loans not exceeding your first year's anticipated income makes sense for most everyday Americans." To find information on anticipated salary, check out PayScale.com.

4. Overdraft protection is free to use. 

This couldn't be further from the truth. The Consumer Financial Protection Bureau found the typical overdraft situation is comparable to a small-dollar loan with a 17,000 percent interest rate.

5. I don't need to budget right now. 

Teens annually spend nearly $100 billion, reports the University of Illinois. Yet only 17 percent of teens maintain a budget, states an H&R Block survey. Budgeting is important now as small expenses can add up and get you into trouble - for example, the average American spends more than $2,500 a year dining out, according to the Bureau of Labor Statistics. Properly monitoring your spending habits can help avoid overspending.

6. Never use credit cards. 

It depends. "If you're unable to control credit card spending, steer clear," Page said. "However, they can be ideal credit building tools for young consumers who use them responsibly." Consider starting with a secured credit card, avoid borrowing more than 30 percent of the credit limit each billing cycle and always pay the balance in full and on time.

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Having these misconceptions doesn't mean teens are doomed to have a damaging financial future. Proper education through programs like the H&R Block Budget Challenge help teens prepare for the real world so they can correct any misinformation received in the past.