Recent data suggests that college students are becoming more reckless with their spending and less able or willing to stick to a practical budget. They are significantly less likely to monitor their finances or develop plans for their financial future. They remain paralyzed by the idea of the debt they are accumulating and do not check their credit score. A variety of factors appears to contribute to this trend and both high schools and colleges are taking some steps to try to reverse the apathy students seem to have about their finances.
Student’s Attitude Toward Spending
In a survey conducted by Higher One and EverFi in 2014, the number of students using a budget dropped by more than 10% from 2012 to 2014. The same survey revealed that students are averse to monitoring their credit and performing necessary, menial tasks like balancing their checkbook. These activities are the building blocks of mindful, planned spending and college students are not performing them regularly.
Mary Johnson, vice president of financial literacy and student aid policy at Higher One opined that the financial backgrounds of the homes the students come from plays a part in how they manage their finances once they are out on their own. For some, budgeting is a foreign idea since their families were well off or isolated from their parents’ financial planning. The change to paperless spending may also have an impact. According to Johnson. “In today’s generation, students might not get that much experience at home because hardly anyone uses cash anymore.”
Community college students were more likely on report financial behaviors considered to be responsible than four year university attendees. This is perhaps because the same students were four times less likely to have their parents managing their money for them. Here again, the behavior they see at home appears to have an impact on their current and future spending.
The same survey reports that students are more likely to possess more than one credit card than they were in 2012 and are simultaneously less likely to pay their credit card bills. In a similar vein, 2014 students were less likely than their 2012 counterparts to make payments on their student loans or consolidate them. Students related that they are intimidated by their mounting debt and don’t want to be confronted with the reality of it. Many don’t even know the amount they owe.
No evidence was released from the survey regarding student use of other money saving methods like planning for sales, clipping coupons or using discount code websites
Student Spending Habits
Understanding where students are spending their money is helpful to address excess spending trends and also from a marketing standpoint. This demographic is changing and illustrates significant spending in certain key areas.
In a separate poll conducted in 2014 by Shweiki Media and Study Breaks provides more information on how students are spending. Non-essentials, recreational activities and things that fall under the classification of entertainment rank high. In fact, the poll discovered that 99% of US college students spent at restaurants at least once every month, and seven out of ten admitted they spent money at a bar monthly.
The breakdown of spending is as follows:
- 66% of students spent $1,200 or more every year on entertainment . Of that number, 21% polled spending $3,000 or more, and 6% spending at least $6,000.
- 87% of students spend money each year on travel and vacations.
- 76% of students spend monthly on beauty products and services.
- 70% of students spend money every month at bars.
- 70% of students spend money monthly on fashion items and accessories.
- 60% of students spend money each month on electronic items.
- 59% of students spend money each month on live music.
- 57% of students spend money each month on media.
- 38% of students spend money each month on off-campus gyms and fitness.
Another national survey performed by 21st Century Insurance found that students spend $765.00 per year on average eating off campus. Most opted for take out or eating as a restaurant. Groceries counted as a very small portion of students’ food spending. When understanding this number, it is important to remember that students in residency at school have some type of meal plan through which they can obtain food at little to no cost. They are choosing to spend in this area when they could get by on less.
The same survey found that 47% of students polled said they spend between up to $25.00 a week on entertainment. This is clearly another choice. Although some students spent more, the largest group was the $0.00 – $25.00 spending group.
Conclusions About Contributing Factors and The Future
Referring to the spending and financial responsibility trends, Mary Johnson, VP of financial literacy and student aid policy at Higher One is quoted as saying, “It really underscores the need for more personal finance education, specifically before students even get to college. It’s so important for students to be able to stay in school.”
Indiana University has decided to attempt to reverse this trend by displaying the student’s accumulated debt at the bottom of all payment statements. This seems to be successful, as student loans at the university have decreased by 12.4%.
Phil Schuman, director of Indiana University’s financial literacy program suggests that peer pressure to keep up with other students’ spending and possessions may have an impact on spending habits in college. Parents and high schools can help prepare students for the task of managing their money with some discussion and practice.
There have been notable and obvious changes in student spending over the past two years alone, with the trends looking to be spend more and plan less. Young people consider the experience of their college years to be important and they may not want to struggle through them joylessly. What this will do to their overall financial future and the prognosis for their success based on bad habits they learn in college remain to be seen.
