Piggy bank on books with graphs

Financial literacy, or the ability to understand and manage one’s financial resources to secure financial well-being, is a vital skill. In fact, research has shown that low financial literacy correlates to lower income levels. Although a number of higher education institutions are beginning to offer financial literacy education, it’s clear that many students are leaving college with large amounts of debt and without adequate knowledge of how to manage their personal finances. Understanding credit and its implications for future life goals is an important piece of financial literacy.

Advice from a senior financial planner

“In conjunction with learning about credit and what creates credit, it’s important for students to learn about credit scores and how this particular score can affect their lives in many other areas, like buying a house or car, for example.”
—Kelly DiGonzini, CFP, MST, senior financial planner at Beacon Pointe Advisors in California

What students should understand about credit:

  • What credit means
  • How credit cards and loans work
  • The importance of credit scores and how they can start building theirs
  • The risks and benefits of using credit

To help your students learn these skills, share this article with them.

Get help or find out moreArticle sources

Sugato Chakravarty, PhD, professor of Consumer Economics and Management at Purdue University, Indiana.

Kelly DiGonzini, CFP, MST, senior financial planner at Beacon Pointe Advisors, Newport Beach, California.

Askew, A., Goering, M., Rysdahl, I., Smith, C., et al. (2013). Financial literacy and perceptions of post-college life of undergraduates. St. Olaf College. Retrieved from https://wp.stolaf.edu/sociology/files/2013/06/Fianancial-Literacy-and-Perceptions-of-Post-College-Life-of-Undergraduates.pdf

Detweiler, G. (2016, December 8). Just how bad is my credit score? Credit.com. Retrieved from https://www.credit.com/credit-scores/what-is-a-bad-credit-score/

Dornhelm, E. (n.d.). US average FICO score hits 700: A milestone for consumers. FICO Blog. Retrieved from http://www.fico.com/en/blogs/risk-compliance/us-average-fico-score-hits-700-a-milestone-for-consumers/

Federal Trade Commission. (2013, September). Credit scores. Retrieved from https://www.consumer.ftc.gov/articles/0152-credit-scores

Federal Trade Commission. (2013, March). Free credit reports. Retrieved from https://www.consumer.ftc.gov/articles/0155-free-credit-reports

Federal Trade Commission. (2012, August). Setting out on your own. Retrieved from https://www.consumer.ftc.gov/articles/0331-setting-out-your-own

Harvard College Griffin Financial Aid Office. (n.d.). Set yourself up for financial success. Retrieved from https://college.harvard.edu/financial-aid/financial-literacy/credit

Raghaven, D. (2014, July 7). How student loans affect your credit score. US News & World Report. Retrieved from https://creditcards.usnews.com/how-student-loans-affect-your-credit-score

Singletary M. (2017, July 11). Average FICO score crosses a milestone, but let’s not get cocky. Washington Post. Retrieved from https://www.washingtonpost.com/business/get-there/average-fico-score-crosses-a-milestone-but-lets-not-get-cocky/2017/07/11/ac288f6a-6650-11e7-8eb5-cbccc2e7bfbf_story.html?utm_term=.1ae7f5948440

USA.gov. (2017, May 11). Credit reports and scores. Retrieved from https://www.usa.gov/credit-reports

US Department of Education. (n.d.). Interest rates and fees. Federal Student Aid. Retrieved from https://studentaid.ed.gov/sa/types/loans/interest-rates

Ally Carlton-Smith, MS is executive editor of Student Health 101. She has a master’s degree in health communication from Tufts University School of Medicine.