Money Management Practices Of College Students - Statistical Data Included

College Student Journal, June, 2001 by Reasie A. Henry, Janice G. Weber, David Yarbrough

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. The final section required students to describe their budgeting practices, such as whether they had a written budget, how often they followed it, if they had one, and estimate their total debt.

The data were collected over a one week period from both undergraduate and graduate education majors registered in randomly selected education classes. Students were administered the questionnaire at the beginning of class and steps were taken to ensure that no one completed more than one questionnaire. All were informed that participation in the study was voluntary and all responses were anonymous.

Results

Data analysis was performed for the entire population and also various subcategories. Both frequency distributions and Pearson Chi-Square were computed. Crosstabulations were also performed. There were 106 females, which corresponded to 84% of the sample and only 20 males. A majority of the students were Caucasian (76%), 84% were 30 years old or younger, and 98% were U.S. citizens. The two largest classifications represented were freshman at 26% and graduate students at 21%. Fifty-three percent were elementary education majors, 29% were secondary education majors, and the remaining 12% were comprised of either music, special or vocational education majors. Sixty-nine percent of the students were never married. The results showed that the average student income was almost $16,000, while the average student debt was approximately $13,000. Based on reported yearly income, 44% of the students had more than 31% debt. The researchers wanted to determine if students actually had a written budget and whether they followed it. Of the 42% reported having a budget, 38% did not follow it all the time, and only 4% of them never followed their budget. Also of interest, was whether undergraduates had more debt than graduate students. It was found that only 40% of undergraduates had debt as opposed to 96% of the graduate students. Gender was related to having a budget with women (35%) more likely to have a budget than men (10%) (see Table 1). Age was significantly related to how often students follow their budget, with those students in the 36 to 40-age group (100%) more likely to have a budget and follow it most of the time (see Table 2). Married students with a budget were more likely to follow them, although they followed them only 52% of the time (see Table 3). Fifty-two percent of the graduate students had a budget and followed it (see Table 4). No significance was found between major and total debt, number of jobs and having a budget, classification and total debt, gender and debt, and age and debt.