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8 Scary Financial Statistics — and How to Avoid Becoming One

By U.S. News & World Report

When it comes to how Americans are handling their finances, the numbers are concerning.

For example, the stats aren’t good on saving for retirement or saving for an emergency. The numbers are just as bad when looking at credit card debt and student loans. And let’s not even get started on financial literacy — or the lack thereof. “We really try to avoid scaring people, but I am continually surprised and concerned about some of the statistics,” says Ted Beck, president and CEO of the National Endowment for Financial Education.

[See: 8 Personal Finance Myths Money Experts Want to See Disappear.]

Want to avoid becoming a scary personal finance statistic? Good idea. Here are eight troubling money facts — and how to sidestep the quicksand.

Fact: Two-thirds of Americans would struggle to scrounge up $1,000 in an emergency, according The Associated Press-NORC Center for Public Affairs Research.

Let’s say you had to pay a $1,000 car-repair bill tomorrow. Can’t? You’re not alone. Most Americans couldn’t come up with $1,000 to fund an emergency, including many families who make more than $100,000, according to the study.

But don’t despair. The good news is that even a little bit of savings goes a long way. Just $250 to $749 squirreled away in a savings account can help families avoid eviction, missing housing payments and other financial downfalls, according to an analysis from the Urban Institute. So, start small, and you’ll see a big change in your financial security. That financial cushion will help you weather setbacks while you work on building a true emergency fund of three to six months’ worth of expenses.

Fact: Only 24 percent of millennials demonstrate basic financial literacy, according to a study from the National Endowment for Financial Education.

This statistic is made even more worrying considering that 69 percent of the millennials surveyed rated their financial knowledge highly, according to the study, done in partnership with the Global Financial Literacy Excellence Center at George Washington University.

Learn to recognize — and learn from — your money mistakes. “Personal finance is a trial-and-error exercise,” says Dylan Ross, director of communications and financial planning for the Garrett Planning Network, a group of hourly-based, fee-only financial planners. “If we don’t recognize that we’re making errors first, we won’t get better at it.”

[See: Basic Money Lessons You (Probably) Missed in High School.]

Fact: Among adults who have combined finances in current or previous relationships, 2 out of 5 fess up to committing financial infidelity, according to the National Endowment for Financial Education.

An open and honest attitude toward money is important in any relationship with shared finances. It can ensure that you’re on track to meet financial goals and are sticking to a shared budget. Couples can use myriad strategies to co-manage their money, from joining every single account to managing everything separately.

Some couples find success with combining most things, but agreeing on a no-judgment allowance for discretionary spending. “If it’s important in a relationship that you have separate accounts, or that you want a little spending money that you don’t want to be held accountable for, just set some limits,” Beck says.

Fact: About 77 million Americans, or 35 percent of adults with a credit file, have debt in collections reported in their credit files, according to the Urban Institute.

Even scarier: These borrowers owe an average of $5,178, the report finds.

Not paying your bills on time is a double-whammy. It costs you in interest and fees, and dings your credit score, making consumer debt more expensive for you in the future.

Fact: Just 46 percent of Americans have a rainy day fund, according to FINRA’s National Financial Capability Study.

A robust emergency fund is key to weathering financial downturns, such as job loss, and funding unexpected expenses, such as health care bills.

“Ideally, an emergency fund should be for stuff that may or may not occur,” Ross says. Don’t spend it on semi-regular expenses, such as new tires or a quarterly insurance payment, he says. You should have cash reserves on hand for those expected, but irregular, expenses.

[Read: No Savings, No Backup Plan, No Fairy Godmother: How to Handle a Financial Disaster.]

Fact: The number of consumers age 60 and older with student loan debt has quadrupled over the last decade, according to the Consumer Financial Protection Bureau.

Parents who overborrow for their child’s education put themselves in a dicey situation. Not only do they have fewer federal repayment options than their children, but Mom and Dad don’t get the income boost from the college degree they’ve funded. Plus, they’re closer to retirement.

Parents who are planning to borrow student loans should consider other options for financing their kids’ college educations, including thinking about a cheaper school and ensuring that their child is taking on some student debt, too. “There are all kinds of ways for kids to fund college even more appropriately than a parent loan,” says Shannon Pike, national president of the Financial Planning Association.

Fact: Nearly one-third of Americans pay the minimum due on their credit card each month, according to FINRA’s National Financial Capability Study.

Paying just the minimum on your credit card balance means you’ll pay more in interest. In fact, the average household with credit card debt pays a total of $1,292 in credit card interest per year, according to NerdWallet.

Beyond that, carrying a balance could potentially ding your credit score by maintaining a high utilization rate, typically one of the more important factors in your credit score.

Fact: Almost half of student loan holders express concern about their ability to pay off their student debt, according to the Global Financial Literacy Excellence Center.

For student loan borrowers, the sheer amount of debt can inspire fear and uncertainty about the possibilities of repayment. “Most of our introduction to personal finance now comes from making a mistake with something as serious as student loans,” Ross says. Federal student loan borrowers can research repayment plans, such as income-based repayment, which may reduce their monthly bills and work with their student loan servicers to rework their repayment schedule.

More from U.S. News

8 Financial Steps to Take After Paying Off a Debt

What to Do If You’ve Fallen (Way) Behind on Your Credit Card Payments

11 Money Moves to Make Before You Turn 40

8 Scary Financial Statistics — and How to Avoid Becoming One originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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