Opinion: Personal Finance Key to Keeping Your Head Above the Financial Water

In Uncategorized on November 20, 2008 at 10:50 pm

What would you do if you were given $5000? Would you splurge it all on material things such as clothes, video games, movies, and CDs?

Here’s a bit of math: let’s say that as a kid you get $10 a week for allowance—that’s $520 a year. If this has been your allowance since eight years old and stayed that way until you turned eighteen, you would have received $5200 from allowance alone. Let’s not even worry about birthday money, odd jobs, or the regular job you may already have. So, many of us have been given $5000 already. What have you done with it?

It’s probably safe to say that many of us, myself included, have spent most of their money on things such as new movies, hot games, and nice clothes. According to a survey conducted in 2006 by Charles Schwab Corp, an institution that specializes in finances, nearly a third of teens are already beginning to accumulate debt from credit cards and other means even before reaching the age of 18.

We need to be very careful and very wise with how we handle our money as we prepare to enter the working world. A lot of us, especially as college students, need to start focusing on our financial literacy as much as we focus on our midterms, the Phillies, and what concerts we plan to go to during the weekend.

We can all easily develop our spending habits by building up our financial literacy. Financial literacy is a person’s ability to manage their finances in a smart way that considers their present situation while taking future plans into account. Many of us can agree that with the economy’s recent downturn is making life harder for a lot of us. After all, our parents and friends are continually getting laid off, our grandparents are suddenly losing their retirement plans, and many of us will feel the hit as we find ourselves searching harder for financial aid. So many of us are probably getting our money acts together, right?

Not really. In reality, the average financial literacy of America’s youth is actually decreasing. According to the 2008 Jump$tart Financial Literacy Surveys of High School Seniors and College Students, high school seniors answered about 48.3 percent of the financial literacy questions correctly in 2008, which is almost 10 percent lower than the 57 percent from 1997.  All of the surveys’ average scores have been close to 50 percent since 2000, meaning that your average high school senior knows about half of what he needs to know about making good financial decisions.

Of course, some of us are luckier than others in the face of the changing economy, so the increase of financial literacy doesn’t seem as urgent. I remain fortunate enough to be able to go to college since my parents worry about all the finances, and they remain generous enough to pay for my phone and a good portion of my college tuition. However, as an English major in my junior year who is still undecided in my desired career path, I have a good reason to be worried about my financial stability and independence.

As tuition costs rise and student loans fall, families struggle more to pay for college costs. As more parents continue to lose jobs, students need to borrow more money from suffering companies and banks, which means there is not enough money to go around.
According to an article posted on October 25 in the Philadelphia Inquirer, the Pennsylvania State Board of Education found that tuition costs have increased considerably in the last five years: 22.5 percent in two-year public schools, 31.1 at four-year public schools, and 14.1 percents at four-year private schools. In another Inquirer article posted on October 20, Pennsylvania State System of Higher Education will have PA colleges prepare for a budget cut plan that will likely raise tuition costs by about 4 percent. Regardless of whether you chose to go to Arcadia or not, paying is going to be difficult.

We’re all in college because of all the statistics and information you hear from your parents and teachers about going to college: high school grads on average will make about $30,000 a year, college grads with four years will make about $52,000 a year, and doctoral degree level grads will make about $89,000 a year.

If you’ve already been saving  and are miles ahead of me in planning your financial future, more power to you. But those of us who aren’t need to begin preparing our money so we can live easier in the future. Of course, we’re always going to buy things we like just because we want to, but we can practice a bit of foresight when managing the money we receive. Take a portion of your money and keep it off to the side so that you always have money should you ever really need it. Talk to parents, teachers, or friends to help increase your financial literacy in simple ways, like learning to balance a checkbook. Most importantly, be consistent with any system you choose to manage your money; money is hard to earn, but very easy to lose.


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