Capital One survey finds many students feel unsure or unprepared to manage their own finances, but conversations with parents help build confidence
MCLEAN, Va., June 14, 2011 /PRNewswire via COMTEX/ --
This month, millions of young adults across the country will celebrate their graduation from high school. To mark this achievement and help them prepare for the next chapter in their lives, many graduates will receive monetary gifts from family and friends. According to a new survey of high school seniors sponsored by Capital One Financial Corporation (NYSE: COF), 75 percent of this year's graduates expect to receive gift money for their graduation. Yet only 19 percent of seniors polled have created a budget and mapped out a plan for the cash, and only 45 percent of survey respondents plan to put their graduation gift money in savings. The survey results suggest that graduation season is an ideal time for parents and graduating students to have important conversations about money management and financial decision-making, allowing graduates to make the most of their money as they set out into the "real world."
"Good financial habits and decision-making skills are crucial building blocks for economic success, and it's never too early - or too late - to talk about smart money management," said Shelley Solheim, Director of Financial Education at Capital One. "Graduation marks a milestone achievement and a time of change in life, and money certainly comes in handy to help new graduates meet new needs and responsibilities. We encourage parents to take advantage of opportunities to talk to their teens about finances, particularly as high school seniors graduate and embark upon the next phase of their lives."
Graduates look to parents for financial guidance
Most students (87 percent) report that their parents are their primary resource for information about money management and personal finance issues, but only 22 percent of high school seniors polled report that they talk to their parents about money management "frequently." Another 44 percent say that they "sometimes ask their parents questions" about personal finance. The survey suggests that parents' efforts to teach their kids about money have a significant impact on their teens' confidence regarding money management skills:
- About half (49 percent) of all high school seniors surveyed believe that they are "highly" or "very knowledgeable" about personal finance, but of the students who report frequent conversations about money with their parents, 70 percent rate themselves as highly or very knowledgeable about personal finance.
- The graduating seniors who say they talk to their parents about money frequently are more confident in their ability to make smart spending decisions, with 83 percent grading their general spending decisions as an A or a B compared to only 67 percent of all respondents.
Nearly four in ten (38 percent) graduating seniors say that they are unsure or unprepared to manage their own banking and personal finances, and the survey suggests that many parents may be missing out on opportunities to help their children understand key concepts and build their personal finance skills.
- Of those students planning to take out student loans for college, 44 percent say that they have either not discussed with their parents how student loans work, or they have had a brief conversation with little detail.
- About half (54 percent) of students who receive an allowance say that their parents "sometimes" talk with them about how it should be handled, but 30 percent say that these conversations "rarely" or "never" take place.
"It is more important than ever for young people to learn about and gain experience with smart money management, especially before graduating from high school and heading to college or into the workforce," said Scott Gamm, founder of HelpSaveMyDollars.com and a sophomore at New York University's Stern School of Business. "I encourage young adults to take charge of their financial futures now. Reach out to your parents and ask them questions, get them to help you create a budget, and don't forget to put money away in savings."
To help parents and young adults effectively talk about financial choices, challenges and dreams, Capital One has partnered with Search Institute to create Bank It, a free multimedia financial literacy program available online at www.bankit.com. The program is designed to help parents and teens work together to learn practical skills for making positive money choices and avoiding common mistakes.
Managing an allowance and job experience help build confidence
A little over one-third (37 percent) of high school seniors polled receive an allowance. Many experts suggest that an allowance can give kids helpful money management experience, and the survey results suggest that those students with an allowance may help develop good financial habits and boost confidence in money management skills.
- Half (50 percent) of high school seniors polled who receive an allowance report that they are currently using a budget to manage their expenses and savings, compared to 35 percent of students who don't receive an allowance. Similarly, 55 percent of students who receive an allowance report that they balance their checkbook at least monthly compared to 40 percent of students without an allowance.
- While 55 percent of students polled who receive an allowance believe that they are "highly" or "very knowledgeable" about personal finance, only 45 percent of students without an allowance report the same level of confidence.
Having a job is another key way students reported developing their personal finance skills. Of those who have had a job before, 72 percent think that their job experience has prepared them for their financial future in some way. Only half (51 percent) of high school seniors surveyed currently have a job lined up for the summer, however.
Tips for students
Capital One offers graduating seniors the following ten tips for a healthy financial future:
- Establish financial goals. As a first step to financial freedom, consider and establish your own financial goals. Short-term goals could include setting aside money to cover everyday expenses or saving toward a vacation with friends. Long-term financial goals might include planning to repay student loans or saving to buy a new car.
- Develop a realistic budget that you can stick to. After graduation, many seniors may be responsible for a number of bills and personal expenses for the first time. Once you've established financial goals, create a budget of expenses you expect to incur. Gather recent receipts and be sure not to forget bills or items that may be automatically deducted from your bank account. Then determine your expected income. Determining your expenses and your income will show any gaps and will allow you to allocate your money properly, ensuring you are in control of your income and on track to meet your financial goals.
- Prepare for the unexpected. When creating a budget, be sure to set aside money for emergency situations or unexpected expenses.
- Set savings goals that help you follow your dreams. While it might be challenging to put aside money in savings, this is an important habit to establish, as savings will help fund your financial goals. One of the easiest ways to make sure you're saving regularly is to have money automatically transferred to savings every month or with every paycheck. It may also be helpful to talk to your friends and family about saving and support one another's savings goals.
- Keep track of your money. Monitor your expenses, receipts and bills. Use a record-keeping method that works for you (budgeting software is often helpful, but a simple spreadsheet or even a pen and paper work, too).
- Think about how you spend your money. Before you make a purchase, consider your needs vs. wants. Try to avoid impulse buys and take notice of how others affect your spending.
- Live within your means. If you can't afford something, don't buy it. It may sound simple but, in practice, it can be a challenge. Many people spend more than they earn and find themselves with too much unnecessary debt.
- Simply pay attention. Thoroughly read all bills, contracts and fine print. This is one of the most important keys to financial responsibility. It's important to know your interest rates on all credit cards and loans. You should also check your bills closely for mistakes each month and report any incorrect charges immediately.
- Pay on time. Paying your bills on time is the most important step toward establishing a good credit history. If you anticipate that you will be late on a payment, contact your lender in advance to make them aware of your situation and see if there is any room for negotiation.
- Watch out for identity theft. Monitor your bank and credit card statements for any incorrect charges and make sure to check your credit report at least once a year. Consumers are eligible for one free credit report every year from each of the three major credit reporting agencies. Individuals can request their free credit report online at www.annualcreditreport.com or by calling 1-877-322-8228. Consumers should also be sure to correct any mistakes on their credit report right away.
The findings reported in this release are from a survey conducted by the opinion research firm, Braun Research of Princeton, New Jersey. The survey was sponsored by Capital One Financial Corporation in McLean, Virginia. Braun Research completed 501 interviews with graduating high school seniors throughout the United States. The interviews were conducted between 5/10/2011 and 5/16/2011. The margin of error for this study is +/- 4.38 percentage points at the 95% confidence level. Sampling for this study was supplied by SSI. Sampling for this study was conducted using a national probability replicate sample. All interviews were conducted using a computer assisted telephone interviewing system. Statistical weights were designed from the United States Census Bureau statistics.
About Capital One
Capital One Financial Corporation (www.capitalone.com) is a financial holding company whose subsidiaries, which include Capital One, N.A. and Capital One Bank (USA), N. A., had $125.4 billion in deposits and $199.3 billion in total assets outstanding as of March 31, 2011. Headquartered in McLean, Virginia, Capital One offers a broad spectrum of financial products and services to consumers, small businesses and commercial clients. Capital One, N.A. has approximately 1,000 branch locations primarily in Texas, Louisiana, New York, New Jersey, Texas, Louisiana, Maryland, Virginia and the District of Columbia. A Fortune 500 company, Capital One trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 100 index.
SOURCE Capital One