Money Management Practices of College Students

Article excerpt

Many college students are living on the edge of financial crisis and many of them do not possess the knowledge needed to manage their money. The purpose of the study was to determine the use of money management practices of Education college students at the University of Louisiana at Lafayette. The sample consisted of 126 Education majors in randomly selected Education courses which were being taught, at each academic level, in the Spring 2000 semester. Subjects were administered a 13-item questionnaire including items concerning demographic data. income, debt, and budgeting practices. Frequency distributions and Pearson Chi-Square were computed. Findings showed that women were more likely to have a budget than men, married students with budgets were more likely to follow them, and those aged 36 to 40 were more likely to follow them most of the time.

Many college students are living on the edge of financial crisis and many of them do not possess the knowledge needed to manage their money. While students at the university, they are constantly accumulating debt, through student loans and credit cards. They may not realize how their current debt can negatively affect their future credit rating. Without consistent money management practices, students will find it difficult to reach financial goals (Bowen & Lago, 1997).

What does a good money management plan include? According to Musk & Winter (1998), it will include "regular generation of financial statements; budgeting; control of spending; recording income and expenses: and tax, insurance, investment, retirement and estate planning" (p. 1). The difficulty in creating and using a money management plan is that many students are not familiar with money management practices (Chen & Volpe, 1998). Chen & Volpe (1998) blames the colleges for not providing financial management courses for students. The Youth and Money Survey (1999), found that even though 65% of the students had an opportunity to schedule a money management course, only 21% of them took the course. The amount of financial information a student has usually impacts their ideas and choices regarding finances (Chen & Volpe, 1998). Kendrick (1999) stated that only 44% of students understand the term `budget'; in fact, only 18% of the general population possesses a basic appreciation of simple money management practices (Elliot, 1997). Another hindrance to students is simply that they are not as capable of coping with actual circumstances involving finances that they will encounter when they are older (Family Values, 1998). One reason is that most of them are in the beginning phase of their "financial life cycle" and a majority of their money is spent rather than invested (Chen & Volpe, 1998, p. 5).

Although the primary rationale given by students for obtaining a credit card is to establish a good credit history (Murdy & Rush. 1995), 28% of students carry monthly credit card debt (Youth and Money Survey, 1999). Due to the easy access to credit cards in colleges, approximately 80% of full-time undergraduate students have credit cards with an "average outstanding balance (of) $2,226 and 10% of them have outstanding balances of more than $7,000" (Kendrick, 1999, p. 1).

Method

The sample was drawn from randomly selected Education courses, offered at the University of Louisiana at Lafayette, which were being taught, at each academic level, in the Spring 2000 semester. The instrument used was a 13-item questionnaire. It was constructed by the researchers, because our study only required a limited amount of data and some of the other questionnaires either included unnecessary items or contained items inappropriate to our population (education majors). Items contained in the questionnaire included demographic data, such as gender, race, marital status, classification, major, citizenship, and age. The second section dealt with employment status (full- or part-time), number of jobs, and total gross yearly income estimate. …