http://www.cambridge-credit.org/ -- Transcription: Hello, and welcome to Your Money 2.0. I’m Bill Greider, Social Media Intern at Cambridge Credit Counseling. Like many of you watching this webisode, I’m a college student. Currently, I’m finishing my senior year at Western New England College, majoring in marketing/communication and advertising. Before arriving at Cambridge I didn’t think too much about debt or saving for my future, partly because of my busy schedule with classes, practice, and studying -- just like many of you. However, my internship really opened my eyes
One of the more startling things I learned is that people between the ages of 18 and 25 are the fastest growing segment of bankruptcy filers! This astounding statistic can be attributed to the fact that 84% of college students already have credit cards, and of that 84%, 50% have at least four cards. What’s worse, the average balance on those accounts will be more than $3,100 when the student graduates. Combine that with the average student loan debt of $21,000, and the fact that we’re at a time in our lives when spending is unavoidable, whether we’re purchasing our first vehicle or renting an apartment, and it seems like the deck is stacked against us. If we want to get our chance at the American Dream, people my age need to find ways to manage our finances so all this debt we’re taking on won’t be a burden on our lives for years to come.
With college tuition increasing at roughly 7.9% a year, my generation will undoubtedly have the highest student loan debt in our country’s history. This is particularly alarming when you see how the older generations are struggling. According to a study by the Wall Street Journal, if the current economic climate persists, about 45% of baby boomers will run short of funds for their retirement! Those are our parents, the ones who are supposed to be setting an example for us to emulate! Unfortunately, it looks like their lack of financial knowledge is being passed down to us.
It seems obvious to me that education is the key to breaking this cycle, and one of the most important concepts students can learn is interest. Interest represents the money charged by a lender for the privilege of borrowing money. You pay interest when you use your credit card or when you get a loan from a bank. No one enjoys paying interest, but it can work in your favor, as well. Albert Einstein once called compounding interest the 8th wonder of the world. The way it works is simple. Let’s say you make a deposit in an interest-bearing account. When your account compounds, that interest you earned is added to your principal and starts to earn interest on itself. To illustrate compounding interest, I visited moneychimp.com and created the following example. If a student put $1,000 in a savings account earning 3% interest, and never made another deposit, at the end of 10 years they would have $1,343. Not bad, but we can do better. If the same student were to deposit just an extra $10 per week into the same account, at the end of 10 years they would have $7,483. That’s letting your money work for you.
In my time at Cambridge, I’ve found that becoming financially literate only requires a little bit of time and research. I found websites such as MyMoney.Gov and programs like the FDIC’s Money Smart for Young Adults that are dedicated to teaching financial literacy and improving the understanding of money management. YoungMoney.com offers a stock market game that helps young adults learn the basics of investing and how the stock market works. On www.Schwabmoneywise.com you’ll find budget planning tools and a credit card payoff calculator you can use to help improve your financial situation. Or you can go to financialliteracymonth.com to use the 30-step path to financial wellness. And if you have a specific problem or issue that you want to know more about, chances are, there’s already a blog devoted to the topic, OR you could call a reputable non-profit credit counseling agency. There are hundreds of them out there ready to help.
If you feel that you’re in the dark when it comes to your finances, don’t wait around until it gets too late and you become a burden on your family. Start helping yourself now by doing some research and making use of the free tools that are available to you.
Well, that’s it for this edition. As always, we welcome your feedback and ask for your thoughts and suggestions by e-mailing us at [email protected]. Thank you for watching. Until next time, I’m Bill Greider for Cambridge Credit Counseling.