Are Colleges Teaching Personal Finance?

   

college simple money man

Well they weren’t teaching Personal Finance when I was in college, which was…umm…let’s just say a couple of Presidential terms have passed since I graduated :-). Who knows maybe I would have made my coffee at home instead of stopping at Starbucks 2-3 times a week before going to the library for a late night studying session. Since I went to school in the evening and worked during the day, maybe I and many others would have started investing in my late teens and early 20s.

 

Phyllis M. Wise, Chancellor of the University of Illinois at Urbana-Champaign and a vice president of the University of Illinois was asked in the Chronicle for Higher Education should we be preparing students for the work force, or should we be preparing them for lifelong learning? She said the answer is, “Yes.” In addition, Carolyn A. (Biddy) Martin President of Amherst College says that College is for the development of intelligence in its multiple forms. So why doesn’t it include Personal Finance…..managing your own money that you’ll have to do for the rest of your like no matter what profession you choose anyway.

 

Ted Talk Re: Personal Finance

For those who don’t know about these, Ted Talks are highly informative, brief and strong messages from accomplished people. They can be found on YouTube for all types of topics and industries, are succinct, and given by subject-matter experts. Recently, I came across one related to the lack of Personal Finance taught in colleges and the effects. Alexa Von Tobel, Founder and CEO of LearnVest begins to talk about The Biggest Loser and how there should be a similar show related to Personal Finance. She says that “Personal Finance is not taught in high schools, colleges, or graduate programs across the United States….and taught through trial and error.”  Some of the statistics she mentions are alarming.

  • Americans are making up to 10 PF decisions per day!
  • 3 out of 4 people feel like their finances are out of control
  • 61% of the country is living paycheck to paycheck.

Then she talks about the root case being something that was never learned. She presents an example of person who earns $35,000, paying $1,200 per month for rent or over half of her bi-weekly paycheck, paying the minimum payment on her debt, not starting an emergency savings, and not starting a retirement plan. The full Ted Talk can be found here:

 

Please check it out as I KNOW I’ve missed a bunch of other important information from this 11 ½ minute video. The point of Alexa’s talk is to implement a simple solution for college seniors to teach them 5 principles. She says these are: (1) Follow a budget, (2) Be debt free, (3) Establish an emergency account, (4) Negotiate your salary, and (5) Start saving for retirement now. This is huge because it applies to all students no matter what have majored in. Maybe it can be sort of like an exit interview before you officially graduate from college.

 

Where We Rank in Personal Finance Education

The Wall Street Journal published a study performed by Standard & Poor’s Ratings Group where the US is ranked 14 in the top 20 countries in basic financial literacy (click chart below to expand).

 

Annamaria Lusardi, Denit Trust chair of economics and accountancy at the George Washington University School of Business believes that Personal Finance education can help and should be taught at Colleges and Universities. She compares financial literacy to driving in obeying speed limits, signs, rules, and making sure drivers understand those rules and how this thinking should be applied to Personal Finance education: “…people—especially young people—to survive and thrive in today’s financial environment, knowledge of personal finance is a necessity”. The full article is here: WSJ Article Re: Personal Finance Education. 

 

Personal Finance is Practical And Can be Applied Instantly

Activities like paying our bills, saving, checking our credit, are things we do on a regular ongoing basis. That’s why there so important because most of us are going to have to do these routine things for most of our adult lives. Slipping up on these definitely has the potential for consequences. According to Constance Brinkley-Badgett from Credit.com, “recent study by the National Financial Educators Council (NFEC) found that 28.8% of Americans aged 65 or older said their personal lack of knowledge about personal finances caused them to lose $30,000 or more in their lifetimes”.

 

Unlike other prerequisite courses we have to take before we start taking electives, information from Personal Finance courses could be used the same day. You’re a college kid commuting working part-time. You don’t live on campus and don’t have a meal plan. How about setting up a monthly budget to eat out twice a week instead of every day? How about setting some money aside, maybe even $15-$20 to earmark for paying your loan once you graduate? How about singing up for a credit card for those meals, but making sure you are disciplined and use it in a manner so that you’ll know you’ll be able to pay it off in full each month and at the same time build your credit?

 

So when did you learn about Personal Finance (college, before, after)? How important do you think it is to teach it in college?

 

 

Main pic credit: Press Information Bureau 

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I use Personal Capital because (1) it’s free, (2) it tracks all of my accounts and overall net worth, (3) my account balances automatically update, (4) it shows how my investments are diversified and allocated in various sectors, and (5) can use built-in tools like “Investment Checkup” to get….wait for it…free personalized advice!

Simple Money Man (SMM)

14 Comments

  1. Nice article and so true! Personal Finance is not taught in college, at least not the college I attended. I honestly think personal finance should be a requirement in high school as it applies to everyone. Like you mentioned in your post, we all pay bills, pay rent and need to know what our credit score is. I can’t believe that in high school and even college we are required to take foreign language classes or art classes and not a class or two on personal finance. I recently read in an article that the majority of people graduating high school today don’t know how to write or even use a check. I know everything is done online and by credit card, but come on! Keep up the great work!

    • Thank you! It affects everyone that’s why I feel like it’s so important. Who knows maybe credit card lobbyists and banks don’t want it so people can continue borrowing and paying lots of money in interest . With people like us, those kinds of companies don’t benefit I suppose. 🙂

  2. I learned personal finance after college and it was out of desperation. I think we should start teaching the practicalities of it starting in middle school. That will help to get the conversation rolling and make us a more financially for nation.

    • Yes! At an absolute minimum have a specialist come to the school on like career day or something to talk the class for an hour or so about the important of low interest rates, compounded earnings when starting to save early and so forth; just basic stuff.

  3. We need this taught in high school, maybe even middle school. Teach people young and they will remember it much better than if you teach it when people are older.

    A person will generally get their first credit card around 18. It doesn’t really make sense to teach someone if they could potentially already be in debt by the time we get to them!

    Thanks for sharing SMM

    • Thank you! The younger the better and the more prepared for the future. Kids in their tweens have cell phones, but probably don’t know anything about the monthly charges, going over the data limit and things like that. It feels like 18 is so early to be exposed (and thus vulnerable) to credit if you’re not well informed.

  4. I basically taught myself personal finance when I got interested in investing in the stock market in college. From there it was a natural extension and something that I have become super passionate about ever since. I definitely agree that they need to teach this in school PRONTO!!!

    • I think many of us are in the same self-taught boat – sink or swim. We’re swimming and at the same time trying to help others by making sure they don’t sink. Some are interested more than others, but I think everyone should have some basic interest because it’s an important part of everyone’s life really.

  5. I learned the most of my PF knowledge after college although I became familiar with a lot of economics and stock market knowledge during school. I think more schools should make PF fundamentals a requirement. It would really benefit everyone.

    • It seems like colleges are teaching about monetary policies in the US, GDP, foreign currencies, etc., but what about our own monetary policies? When we are young in school it’s important to have a base knowledge of this. I actually knew very little about the market when I was in college….and I had a minor in Accounting! :-)

  6. This is such a huge topic. There are new articles every day talking about how people are struggling to make ends meet. But nothing is being done in schools to prepare students for it. The only way to learn is by trial and error, or seeking it out yourself like most of us have done. Unless we are fortunate enough to have parents who instill these values when you are young. I would love to see courses on PF. Anything from budgeting, investing, saving, debt, credit, etc.

    • That’s how I learned a lot…trial and error. I’m trying to teach my kid about these values slowly. Sometimes he likes to pay the cashier at Walmart and then receive the change. Practical learning I say 🙂

  7. Great analysis SMM! I didn’t learn about personal finance until my after college. It was an immediately awakening and I really wish I had pushed off college to learn more about myself before going. PF is really important and I hate to be such a downer but the fact that they need a TED talk to discuss this means we failed something fundamental already!

    • Thank you. You’re not a downer at all. By stating that we’re failing puts the urgency in place that our learning institutions really need to step up their game and teach this stuff to students to pave the way for smaller student loans, CC debt, and increased savings at an early age.

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