That is in sharp contrast to America

As a whole because some of the figures on debt and lack of savings are truly disturbing.

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Recent Survey from Sallie Mae

Sallie Mae recently commissioned a survey to get a better understanding of financial management skills amongst college students to see how well they were handling their bills. The news is fairly good because almost 80% are paying all their bills on time and not spending money they don't have. That is in contrast to many Americans who have been earning money for years yet still seem to find problems in living to a proper budget.

It clearly disproves a commonly held belief that students are fairly irresponsible when it comes to finance and are relying on expensive credit such credit cards. Previously a survey of students got some fairly disappointing results when they were asked some basic financial questions. In addition the level of student loans is rising but of course that can be a reflection of the increased cost of education.

Sallie Mae's survey found that there was a widespread understanding of credit reports and their potential impact on someone's life. Many students seem to be paying cash or using a debit card which of cost bears no interest costs. Where credit cards were being used they were far more likely to have a cashback feature than a high credit limit.

The bad news is that those with debt who prioritize paying off that which is incurring the highest interest is only around 25%. Equally few appear to have any emergency funds at their disposal. In questioning there is concern about the general amount of knowledge on budgeting and the best way to manage and clear debt though most expressed a desire to learn more.

Simple Questions

There was a simple set of questions that helped in the survey. Students were asked the following:

• If they had a sum of $100 in an account earning 2% a year, what would it be worth in 5 years? One of three answers, $102 exactly, more or less.

• In four different scenarios, who will pay the most interest on their credit card?

  • Someone who pays just the minimum each month
  • Someone who pays off the balance in full
  • Someone who occasionally misses payments and doesn't always pay the minimum required
  • They each pay the same.

• If monthly loans paid back easily then how can you minimize your costs?

  • Repay in 10 years
  • Repay in 20 years
  • No difference.

Only around a third of respondents answered correctly; you would have more than $102, you will pay the most interest if you miss payments and sometimes pay less than the minimum required and the shorter the term, the less the costs.

It looks as though there is a reasonable amount of ignorance among the young but at least it appears that at least they understand the importance of financial management.

Monthly Expenditure

There are many calls on a monthly pay check, especially for those who have a mortgage and a small family but it seems that far too many people have not taken the time to look at their finances and improve their situation. The figure of credit card debt in the USA is truly mind-boggling and credit card companies are charging a high rate of interest on those balances at the end of every month. It is sheer waste but also a sign that people may be spending beyond their means and funding their lifestyle on expensive credit.

The problem seems to be at its worst amongst those approaching and in middle age. They are potentially in trouble because retirement will be looming larger than it is for those college students who seem to be more financially responsible. Is this you?

Time to Act

The economy is better than a couple of years ago and consumer confidence has improved. Job security has returned so there is really no excuse for not getting your finances in order. Perhaps the first thing you should do is get rid of your credit card debt. If your income can justify a personal loan and that means your ability to pay the instalments over the whole term of the loan, three to five years probably, you will be getting rid of high interest charges by using the loan to pay off the balances once and for all. You will need self-discipline so as not to build up balances again.

It's a start. There is lots more for you to do in order to create the savings that you will need. You should not rely on the Social Security System to fund your retirement; it is merely a support for you to go with other provisions you have made. While the younger generation has a great deal to learn judging by its response to those simple questions that many failed to answer correctly, at least there seems to be evidence that the principle of good financial management has been widely embraced. Long may that trend continue through to today's teenagers then small children. Whether the message will get through to older people remains to be seen.

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