The natural instinct in tough economic times is to pull back from the principles of sound financial planning and allow one’s emotions to take over. This instinct apparently affects young adults as much as older adults, according to a recent survey of college students. Yet, in a recession more than ever, it’s critical to set emotions aside and stay the course with sound financial decisions.
Arizona Pathways to Life Success in University Students (APLUS) is a study conducted by the University of Arizona and funded by the National Endowment for Financial Education. It reports 95 percent of students surveyed said they had changed their personal money management in response to the recession.
While some changes were positive (for example, budgeting rose about 3 percent), the overwhelming changes were in behaviors the study categorizes as high risk. Such behaviors include taking a “leave of absences from school” (106 percent increase), using one credit card to pay off another (26 percent increase), and overall increase in debt (60 percent increase for credit cards and 85 percent increase in education loan debt).
For minorities, the rates of increase were sometimes double and triple those of the overall group, which suggests the economic crisis has hit certain ethnic groups and women harder than their white and/or male peers. The crisis ultimately has affected all students’ confidence, behavior, trust in financial institutions and overall well-being, according to the study.
One bright spot in the study showed that direct teaching by parents had the most influence on students’ financial knowledge – more than work experience and high school financial education combined. This is an important responsibility and opportunity for parents. Don’t let your kids figure it out on their own simply through trial and error. Make sure they have proper guidance and access to accurate information to make good financial decisions.
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To learn about teaching your children the importance of money management, read this article from our www.MoneyAz.com library.