When it comes to having financial smarts, there’s a deficit between perception and reality for most college students.
A new survey by the American Institute of CPAs (AICPA) found that 57% of students rate their financial management skills as good or excellent, with just 12% rating them as poor or terrible.
The students’ spending and saving habits tell a different story, however. Nearly half of the students polled reported having less than $100 in the bank at some point during the previous year. In addition, 38% said they had borrowed money from friends or family and 11% had been delinquent on a bill.
Almost all of the 751 students polled agreed that financial management skills are at least very important, but most were not actively seeking to boost their money smarts. Just 39% said they stuck to a monthly budget and 49% said they had saved money for tuition in the past year.
Based on the survey findings, the AICPA’s National CPA Financial Literary Commission recommends students set up a monthly budget, track their spending and expenses, and regularly review their finances. The commission also suggests students start building their credit score by using a credit card with a low limit to make purchases they know they can afford.
The AICPA noted that about 17 million students are enrolled in undergraduate programs nationwide, with many of them in charge of their finances for the first time.
“With this opportunity comes serious responsibility, and if they aren’t making informed, intelligent decisions it can have a negative impact on the rest of their financial lives,” Financial Literacy Commission Chairman Ernie Almonte said in a September 2015 statement on the institute’s website.
The online survey, which was conducted in August, showed that students could be doing more to improve how they manage their money. About one-quarter of respondents said they frequently or very often seek information about personal financial management, with 41% saying they never or rarely do so.
Most students arrive at college unprepared to handle their own finances, the poll found. Only 17% said they learned about budgeting in school, compared to 42% who said they picked it up from their parents or relatives and 37% who said they taught themselves.
The AICPA survey underscores previous findings about the lack of financial knowledge among young adults. In 2014, the Investor Education Foundation of the Financial Industry Regulatory Authority (FINRA) released a study highlighting Millennials’ struggles with money issues.
About 12% of Americans born between 1978 and 1994 do not have a bank account, a considerably higher percentage than among members of Generation X and the Baby Boom, the FINRA study found. Millennials were also more likely than older age groups to spend more than their incomes.