Are Colleges Teaching Personal Finance?

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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 workforce, 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 life 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 cause being something that was never learned. She presents an example of a 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 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 they’re 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, “a 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 signing 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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