Few college students have learned the difference between needs and wants.
The Administrative Office of the U.S. Courts reported that about 1.6 million personal bankruptcies were filed in 2003, up 7.4 percent from 2002, suggesting that many adults haven't learned the basics of personal finance either.
So it's no surprise that many kids don't know how to handle money. Their parents wanted only the best for their kids and, in most cases, provided it. But fiscal responsibility sometimes got lost between designer clothes, piano lessons and a cell phone.
Richard Boyum, professor emeritus of counseling and psychology at the University of Wisconsin-Eau Claire, says most students eventually master money management, but it often takes a few mistakes along the way.
"There are many opportunities to spend money and some students think of money as something to spend rather than as something to save," Boyum says. "I once had a student show up in a new jacket. He said it was a $200 jacket, but he got it on sale and had 'saved' $100. I said, 'Show me the $100.' I explained that he hadn't saved $100, he'd spent $100. This surprises many students.'"
Some young adults have trouble with credit cards and view the credit limit as an invitation to spend what they consider to be their money. Boyum tells the students that credit comes from the bank — not grandma. For many, this is a revelation: Banks are in business to make money and customers have to pay interest on the balance if they miss the due date.
For some students, the concept of accrued interest on debt is as foreign as compound interest on savings. But the information is readily available when opening an account at Wells Fargo, Bank of America and J.P. Morgan Chase or any number of smaller banks.
Boyum urges students to use a debit rather than a credit card and to save the receipt. If a student has a credit card, he urges the kid to leave it at home and to not use it unless absolutely necessary. Racking up a fat bill for dinner and drinks with friends and putting it on the credit card isn't a necessity, contrary to what many students believe on Friday and Saturday nights.
Boyum tells his students to do the math on small indulgences. Some say they only spend $20 a week on beer. Well, kids, that comes to $1,040 a year for Anheuser-Busch's Budweiser and Adolph Coors Co.'s Coors. The total shocks most students.
Boyum urges his students to keep an accurate record of expenditures. Basic bookkeeping helps to keep spending in line and underscores the importance of writing a budget and sticking to it.
Work can teach students discipline and the value of a buck, but study should be a kid's primary concern when in school. Some students work just for pocket money. This is a bad idea, especially when trying to wrap your mind around differential equations or Chaucer's Middle English.
"I tell my students there are 168 hours in the week," Boyum says. "There are 56 for sleep and 40 for school. That leaves 72 for other activities, including part-time jobs and socializing. Students are astonished by this and I tell them that time is their major resource."
School days are a time for kids to figure out the basics. In addition to literature, math and science, they learn about sex, politics and how to organize their life.
"They're young and they make mistakes," Boyum says. "They learn from their mistakes and, on the whole, learn to manage their lives."