Financial Literacy Blind Spots and Financial Preparedness among College Students

Abstract

College students in the U.S. confront unprecedented financial complexity due to rising tuition and living expenses and increased uncertainty around student loan forgiveness and repayment options. This study examines the influence of financial literacy blind spots, the gap between perceived and actual financial knowledge, on financial behaviors and outcomes among college students. For this purpose, we designed the Financial and Economic Well-Being of Students (FEWS) survey. We find that students with financial literacy blind spots are significantly less likely to be able to cover a $400 emergency expense and more likely to have worse banking and spending behaviors, as well as worse credit management, such as using credit cards for educational expenses. We also discuss the role of self-perceived and objective financial literacy, along with a host of socio-demographic factors, in influencing financial behaviors and outcomes. Our findings have important implications for developing targeted interventions to enhance financial resilience among college students.

Keywords: Financial Literacy, College Students, Student Loans, Economic Behavior, Overconfidence

JEL Classification: D1, D14, G53, I22