Some
college students are unfamiliar with basic financial concepts, which could pose
a problem for those expecting to borrow substantial loans to pay for their
education.
In a survey
with 18,795 student respondents at 51 public and private universities and
colleges, the Study on Collegiate Financial Wellness asked five questions about
interest calculations, inflation, college loan repayment, take-home pay, and
credit score components to determine what students knew about consumer finance.
Only 11%
were able to answer all five correctly. About 29% got four questions right and
another 29% got three, but 7% couldn’t provide a single accurate answer. Some
questions apparently stumped students more than others, according to a report in The Conversation. Almost 21% picked the wrong answer on the interest
question, but 41% didn’t get the one on inflation.
“Students
who answered the interest rate question incorrectly don’t understand that
interest is earned not only on money deposited in a savings account, but also
on previously earned interest—a feature known as compounding—while students who
answered the inflation question incorrectly don’t understand that rising
inflation reduces the buying power of money,” wrote researchers Catherine
Montalto and Anne McDaniel.
Not
surprisingly, older students and students who had taken some type of financial
coursework performed better on the five questions. Students attending four-year
private schools fared worse on the quiz than those at two-year or four-year
public institutions.
