By Karen Lynch | American Express Credit Intel Freelance Contributor
6 Min Read | November 06, 2019 in Money
Generation Z arrives with new campus trends, like falling student debt and payments innovations.
Age-old concerns persist: rising costs and managing students’ credit card use.
Students’ relationships with their (and their parents’) money may be a delicate balance, but parents can help kids improve their financial knowledge and skills.
“Generation Z” has arrived on campus—an eager-to-learn, mobile, adventurous, foodie, and financially conscientious bunch, according to researchers. Yet many of these “post-millennial” students say they lack the knowledge and skills to be confident handling money. These are some of the key trends emerging from surveys on today’s college students and their costs, use of student credit cards, smartphone payments, and other personal finance matters.
Starting at the top, a positive trend is unfolding. Students’ and parents’ total annual borrowing for postsecondary education has dropped for seven consecutive years, from a high of $127.7 billion in 2010-11 to $105.5 billion in 2017-18, according to the College Board.1 Inside Higher Ed sees this as the page turning away from a prior “standard narrative around the student loan ‘crisis’ that college has become unaffordable for most students without accumulating massive amounts of debt.”2
The news may be cold comfort to college alums holding an estimated $1.4 trillion in outstanding debt,3 but growing awareness of that burden is altering the choices made by today’s students, according to Nitro, a specialist in college financing. Students are becoming part of the solution, more willing to prioritize paying for college.4
All that said, tuition, room, and board continued to increase in 2018-19—up over 3 percent from the previous academic year to an annual average of $48,510 for private four-year colleges.5 So personal debt remains a significant source of stress for one in three Gen Zs, according to the American Psychological Association (APA).6 And four in 10 students expressed concern about having enough money to last the current semester in a survey by Everfi, a provider of online financial courses.7
What else is in a student’s budget, after accounting for that $48K a year? The College Board notes an average of almost $4,000 a year for books, school supplies, transportation, and incidentals.8 In ranking the importance of those incidentals, students interviewed were pretty unanimous. “It always comes back to food,” according to one round-up.9
Even students living on campus and paying for food plans often graze elsewhere, parents complain. In part, that’s because food is also a big part of another priority: experiences. Since students appear to be such foodies, parents might even get a bump on their restaurant and grocery rewards points on certain cards. To some, this simply means “going out with friends, trying to keep up an active social life,” as one 19-year-old described it.10 To others, it’s experiencing exotic research abroad.
The National Retail Federation showed a slice of student spending in its college back-to-school shoppers report for 2018: The biggest average spend was on electronics ($229), followed by $153 on clothing and accessories, $109 on dorm or apartment furnishings, $103 on food, $83 on shoes, $79 on personal care items, $69 on school supplies, $63 on gift cards, and $53 on branded college gear.11
Another take on student spending, brought to you by the Parent Toolkit, lists the top ways students waste money: wasting food; paying late fees and/or interest on rent, credit cards, and other bills; dropping too much money on the latest, greatest technology; and not taking advantage of student discounts.12
While millennials were mobile pioneers, as Google says, Gen Zs are mobile natives.13 One measure puts this in perspective: A recent survey showed that 64 percent of Gen Zs had made a mobile purchase in the previous 30 days, compared with only 38 percent of the general public.14
Mobile payment options are proliferating, including peer-to-peer payment apps linked to college students’ bank accounts, credit card apps, mobile wallets, and contactless payments. These options have begun to blur, as some credit card companies have been working more closely with peer-to-peer payment providers.
Parents often add students as authorized users to their current credit cards. Another option is to co-sign for the student’s own credit card, which makes the parent equally responsible for the debt though bills go to the student. One benefit of these cards is that they help build the student’s credit history.
Parents beware, though: “If he or she misses payments or runs up a balance, it could hurt your credit score, and it could be difficult to remove yourself from the account later,” according to Consumer Reports, which recommends parents sign up for text alerts about high spending levels or unpaid credit card bills. Another option is to co-sign for a secured card, whose spending level is typically set by the amount of a security deposit.
And have you heard the one about the father who shut off his college kids’ credit cards after they spent overboard, only to turn them on when asked permission for specific purchases? Parents have to protect their own interests, as well as their kids’. As one mom put it: “You can borrow for school if you have to, but you can’t borrow for retirement.”
Generation Z. The Pew Research Center says they’re on track to be the best-educated generation yet.15 Others point out that they are independent, self-confident, and autonomous.16 For all that, though, 81 percent of those between the ages of 18 and 21 report money is a source of significant stress, the APA said, compared with 64 percent of the general public.
“Researchers have found that while young adults in higher education were taking on increasing responsibility for their finances, they displayed a clear lack of skills, knowledge, and confidence in their abilities to do so,” according to Everfi. “In fact, when asked about which aspects of college life they felt prepared to tackle, students consistently reported being the least prepared to manage their own finances.”17
Some, like Consumer Reports, suggest that parents fill the gap by sitting down with college-age students for “the talk”—this time, about budgeting, managing credit cards, and other good money habits. One tip is to share personal experience, for instance, by walking a young cardholder through a recent statement, with a focus on minimum payment warnings and interest calculations.
Generation Z college students are setting new trends in spending and managing their student credit cards and other finances. Their college years may well establish credit histories and habits for life—but students appear to be ill-equipped for the task, in terms of personal finance knowledge. Parents of Gen Zs entering college can play an important role in making their students’ experience edifying, memorable, and as financially stress-free as possible.
1 “Total Federal and Nonfederal Loans over Time,” College Board
2 “Decline in Student Loan Borrowing,” Inside Higher Ed
3 “Student Debt Continues to Rise,” Peter G. Peterson Foundation
6 Stress in America: Generation Z, American Psychological Association
7 “Gen Z & Millennial Financial Behaviors Report,” Everfi;
8 “Average Estimated Undergraduate Budgets, 2018-19,” College Board
11 “Back-to-School and College Spending to Reach $82.8 billion,” National Retail Federation
12 “10 Ways College Students Waste Money,” Parent Toolkit
13 “Gen Z: A Look Inside its Mobile-First Mindset,” Google
14 “Gen Z Demands a Different Approach to Payments,” Javelin Strategy and Research
15 “Early Benchmarks Show ‘Post-Millennials’ on Track to Be Most Diverse, Best-Educated Generation Yet,” Pew Research Center
16 “Generation Z Characteristics & Traits That Explain the Way They Learn,” Julian Krinsky Camps & Programs
17 “Gen Z & Millennial Financial Behaviors Report,” Everfi