Published August 11, 2016
Financial education is not just a need for Filipinos. It is a global need! Our articles have not just inspired our fellow Filipinos but also our foreign friends from all over the world. It is not just a national need but a global need. Below is an article submitted by Amy Nickson, a financial writer and professional content marketer of workingmomsword.com, sharing the need for financial education for students in America.
|Why financial education is a need especially for students
Gaining financial knowledge has suddenly become a major topic across the country. Why so? Because most of the American students are not up to the mark in understanding financial knowledge and racking up more debts during their educational life.
Recently, the Forbes has published a piece of news that students of our nation are below in the global ranking in financial literacy.
The Program for International Student Assessment (PISA) is administered by the Organization for Economic Cooperation and Development (OECD) in every 3 years. PISA took an exam in 13 different countries in financial literacy. The result showed that almost 18% of American students were unable to perform some basic financial tasks like differentiating wants and needs, identifying basic financial documents, and making simple spending decisions. America ranked behind China, Australia, Belgium, Czech Republic, Estonia, New Zealand and Poland.
According to a survey of 42,000 American college students, only 34% of them had personal finance subject in their high school. That means most of the high school students are unaware of financial knowledge! They had not been taught about budgeting or personal finance in school. So, how will they manage their student loan debt in future?
Impact on the nation
Due to lack of financial knowledge, most of the students are unable to manage the cost of education during the higher studies. Lacking financial knowledge leads to default on debts; it hurts credit score. In turn, a bad credit score makes difficult to buy a house, a car, start a family, maintain a standard of living, etc. The impact is severe.
Reasons of the crisis
One of the crucial reasons is that the cost of education is rising high while the income has become stagnant. The outcome is student loan debt raised by 324% since 2014. 71% of students are completing their graduation with debt. Overall outstanding student loan balance is $1.19 trillion. An average grad student carries about $35,000 student loan debt.
The problem will not create such a big impact if students get a good job after completing the study. A good job supports to maintain the cost of living while making payment on the loan. But, due to rising unemployment, student are not able to tackle their loan.
According to the report of economics21.org, almost 8% of graduates are unemployed at the age of 25. Unemployment forces them to choose a job out of their interest. Almost 44% of graduates agree that their job is not standard according to their skill and degree. They’re working just to survive.
How to tackle the crisis
Apart from student loan debt, a person can accumulate many other debts (credit card debts, medical debts, mortgage loan, auto loan). What’s more important is that how you’re tackling the debts. Money management to pay off debts in the right way is very vital subject to understand.
Some ways are very common. You just need to apply it effectively to get the benefit. Have a look:
If you consider a part-time job along with your studies, you may be able to manage your costs as well as set aside an amount whenever possible. Thus, you may not feel helpless after seeing the figure of your student loan debt just after passing out.
Often people show interest in making money. But, they overlook the subject “money management”. It’s a blunder. Learn how to manage money as early as possible. There is no perfect age for learning a subject. If you don’t get personal finance lesson in your high school, then start learning now. Make sure the now is “right now”. Read financial websites, journals, magazine to make this subject a piece of cake.
Setting the financial goal is very important. You have to be sure about the student loan debt, rent, utilities, car payments, emergency fund, savings account, and even retirement. And to fulfill these goals, you have to earn a significant amount of dough. So, choosing a right field as well as knowing how the college will cost in the future is important.
Try to become strategic during your student life. If you’re doing a job along with studies, then make sure you’re living a life within your means. If you’re staying out of your parent’s place, then share the rent with other roommates, follow a budget, buy used furniture, go for thrift shopping, etc.
Finally, most of you come to college with limited financial knowledge. The day-to-day cost of managing college life is tough and may force you to use credit cards. Don’t let the credit card debt add on to your student loan debt. Otherwise, you may be in a financial mess throughout your life.
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