6 surprisingly common
student money misconceptions
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.
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.
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.
