The results are in, and the prognosis looks grim. Half of Texas is one financial crisis away from slipping into poverty, according to a report released last week by the Corporation for Enterprise Development. The corporation also ranked Texas 41st among states that help its residents protect their assets.
Texas consistently ranks chief among states with low unemployment rates and consistently high job growth. Those within the lower and middle classes, however, still have difficult times climbing the economic ladder and feel financially insecure. Unfortunately, financially literacy is one of the main reasons these problems persist.
Students should make conscious efforts to practice and learn wise spending, saving and investing habits early on, before it’s too late.
The lifetime savings and consumption model describes the average person as being a primary consumer during the initial and latter portions of their lives. Decisions like attending college, buying a house and paying for a wedding are events economists assume most people will end up borrowing for, which would place them in consumption categories.
Even though college is considered an investment (and here, I use that word lightly), you still may have to borrow for it. Years down the road, you should eventually yield a return on your college investment with wages you earn from a job. Soon, after paying off debts incurred during these early stages, you may even get to save. Saving is crucial during the years you work since you’ll be mostly consuming during retirement. There’s just one problem: if you do not save during these years, you could have serious problems ahead.
According to a report published by the Boston Consulting Group last year, millennials account for about $1.3 trillion in spending. The trend in spending, which starkly contrasts previous generations, comes from the millennial need to engage with brands. However, this need to do so is causing a decrease in savings, while consumption increases at a steady rate.
This increase in consumption during the “saving years,” coupled with the existing cost of borrowing to attend college, could cause current students to have financial issues during their latter stages of life, and even before.
What’s sad is that quite often consumers can take a few extra simple steps that could help decrease their consumption during these saving years. For example, credit card companies and banks who are looking to make a profit prey on the young who often don’t know better. This especially applies to students. Asking questions about the terms of student loans, credit card interest rates and financing options for your first home or automobile could all lead to a brighter financial future.
Remember, when it comes to your money, there are no such things as dumb questions.