More than 40% of American college students don’t have basic skills on how to earn, spend, save and invest their money, but BGSU experts said steps like expense tracking and creating payment plans will help students.
Only 40% of students who attend a four-year college enroll in a personal finance course, according to a study by the National Association of Student Financial Aid Administrators.
The study also showed that just 15% of students who expected to use loans for college felt they had the financial education to pay them off in the future. This discrepancy between needing financial literacy and becoming educated on it was just one reason provided for the low student financial literacy rate.
Roc Starks, a BGSU professor in finance and accounting who teaches personal finance, said another reason for the low financial literacy rate among college students is a focus on teaching core subjects in grade school rather than money skills.
“The country in general hasn’t done a great job at teaching financial literacy, like how to balance your checkbook, how to think about buying a car or saving for a house,” Starks said.
Similarly, Du Nguyen, another BGSU finance professor, said most students do not have debt yet, so they have no immediate incentive to understand personal finance.
However, once a student starts to earn an income, it’s important for them to understand how to spend and save money to build the habit of handling it responsibly.
“Students are going to start having debt, especially if the student is using loans to finance their studies. It’s important that they pay off the debt as soon as they want, so it’s important that they start improving their financial literacy,” Nguyen said.
Starks said students should also begin understanding how their behavior impacts their finances now so they can better prepare for their future.
“It’s a difficult thing to envision yourself 45 years in the future and how you’re going to be financially, but it really needs to be addressed,” Starks said.
Starks said one of the most important steps students can take toward financial literacy is understanding interest, whether it be on loans, savings or investments. Compound interest, a term that refers to interest calculated on the initial amount and the accumulated interest amount, is also vital to understand.
Nguyen advised students to use the internet to learn about finances or subscribe to newspapers that have finance columns or articles. With a BGSU email, students can access some paid subscriptions for free, including the Wall Street Journal or the New York Times.
The average federal student loan debt for Ohio students was $35,072 in December 2024. Nationally, students who use federal loans to attend public institutions, like BGSU, owe an average of $28,775, and 42% of students who borrow money to go to school work to pay off their loans for more than 20 years.
To offset the intimidating task of paying off student loans, Nguyen said students should make a loan repayment plan by understanding how much they owe, how much their income is and the cost of necessary living expenses.
He suggested designating 50% of income to necessary expenses like groceries, rent and loan payments, 30% for recreational wants like concert tickets and 20% for saving.
“The sooner you can pay that [loan] off, the less interest you will be charged,” Starks said. He also noted that some students choose to move back home after college or dedicate income from a second job to repay their student loans as soon as possible.
To improve their general financial situation, Starks also suggested that students should try not to just pay their minimum credit card payment because the interest can build up and result in credit card debt. Additionally, it is important to fight against the consumer mentality, which often leads to excessive, unnecessary purchases.
BGSU student Kate Yamanishi said she has to remind herself not to always feed into the consumer mentality.
“I always get yelled at by my dad for spending too much money when it comes to online shopping, so knowing my limit and knowing that sometimes the things that I have are enough,” Yamanishi said.
Nguyen also suggested tracking expenses, even if it’s temporarily, so students can understand how much they are actually spending and what they are spending it on. Simple changes like cooking their meals instead of eating out can improve their financial situation.
BGSU offers a personal finance course (FIN 2000) that is open to all students looking to improve their financial literacy. Additionally, they have some financial education resources on their website.
