College Classes to Improve Your Financial Literacy
If you’ve spent any time lately reading about the financial issues affecting young adults, you may have come across news reports about the need to increase “financial literacy.”
Turns out, even the best and brightest college students and recent graduates aren’t necessarily skilled at managing their money—and they aren’t being provided with much education regarding basic financial concepts.
Meanwhile, study after study shows Millennials are struggling to keep up with financial priorities like:
• Student loan debt: Most student debt consists of federal government loans, which now totals more than $1.5 trillion, according to numbers from the U.S. Department of Education’s Office of Federal Student Aid. That money is owed by 43 million borrowers, or more than $33,000 per borrower on average. And the Federal Reserve Bank of New York reports that in the first quarter of 2019, 10.9% of aggregate student debt was 90-plus days delinquent or in default.
• Credit card debt: In a 2019 report from EVERFI and AIG, 36% of U.S. college students said they already have more than $1,000 in credit card debt. Of the 30,000 students surveyed, nearly half (46%) said they currently had at least one credit card, and 61% of those students got their first card when they were 18 or younger.
• Retirement savings: A 2018 report from the National Institute on Retirement Security found that two-thirds (66%) of working Millennials have nothing saved for retirement. The report says only 5% of working Millennials are saving adequately for retirement, based on amounts recommended by financial experts.
Now, the Financial Literacy Commission—a government group that includes members from the Department of the Treasury, the Department of Education, and the Consumer Financial Protection Bureau—has issued a report of its own, advocating for mandatory financial literacy courses in higher education.
“Along with preparing the workforce, institutions of higher education can prepare their students to make financial choices throughout their lives that enable them to effectively participate in our economy, build wealth, and attain their goals,” the group states in its 2019 Best Practices for Financial Literacy and Education at Institutions of Higher Education report. “Critical decisions that students and families make before, during, and after their postsecondary education influence their financial future.”
The group’s report recommends that schools require financial literacy courses in order to better reach students who otherwise might not know about the courses or understand the value of the information being offered. It also proposes integrating financial literacy into core curricula.
What Is Financial Literacy?
Financial literacy is, broadly, the ability to make good decisions about managing money through budgeting, borrowing, saving, and investing. It can include understanding such basics as inflation, interest rates, compounding interest, risk, and diversification.
Unfortunately, many Americans and young adults, in particular, are unfamiliar with these and other economic concepts needed to make good financial choices. So what options are there for how to increase general knowledge in finance?
Well, 29 states and Puerto Rico introduced some type of financial literacy legislation during the 2018 legislative session, and 17 states enacted legislation or adopted resolutions—but most of the state efforts were directed at high school students.
The increased focus on financial literacy for college students is mostly motivated by spiraling student debt, and the Financial Literacy Commission’s report included a recommendation that future financial aid offer letters include an itemized and sub-totaled cost of attending a particular school for a designated amount of time. It also asks for “broad adoption” of letters that inform students of their annual debts as well as future repayment amounts and repayment options.
There is also concern about what a more general lack of financial knowledge means for the future, as Millennials moved on from school and are embarking upon the other milestones of adulthood, including making decisions about the jobs they take, home ownership, and starting a family.
And as Gen Z-ers head to college and begin entering the workforce, they could stand to learn a thing or two from the Millennial experience. While their financial footprint is still relatively small , early research indicates that this generation is already relatively conservative with their money.
What’s Available Now?
Many colleges and universities already offer some form of help for students who want to gain financial knowledge. Few have required, for-credit classes, but their programs can address topics of concern to those who want help managing their student debt payments, credit cards, and other bills. For example:
• Texas Tech’s Red to Black Peer Financial Coaching offers individual coaching sessions, group presentations, and outreach booths designed to get out the message to students that financial literacy is something that will benefit them in the future. The program’s peer coaches—students pursuing degrees in Personal Financial Planning—cover topics that include creating a spending plan, credit use, student loans, and choosing employee benefits.
• Students at the University of Montana can set up one-on-one counseling sessions or attend scheduled workshops on a range of topics, including understanding financial aid, budgeting, credit use, and ways to save. And all UM students are required to complete Transit , an interactive online course.
• The University of South Florida’s Bull2Bull Financial Education program provides peer-to-peer coaching sessions and workshops that can be scheduled for USF classes, student organizations, fraternities and sororities, or residence halls. Coaching sessions cover several topics, including bill-paying challenges, money management, and even saving to study abroad.
• And then there’s Inequity and Empowerment: Urban Financial Literacy , a course you may have heard about at the University of Pennsylvania. The class, which was new in spring 2019, was co-taught by NFL linebacker Brandon Copeland (a graduate of Wharton Business School). It covered everything from growing wealth, paying taxes, and understanding retirement funds, to the problems poorer Americans often have getting past financial roadblocks to access necessary financial resources.
Can’t Find a Program? Consider DIYing It
If your school doesn’t offer a financial literacy program or personal finance course, you might still be looking for how to gain financial knowledge. With some leg work, you could put together something yourself. You might glean some of what you need from college courses in macroeconomics and microeconomics, or basic finance, statistics, or accounting classes.
Or you could build a list of topics you know you need help with, start working on them, and learn as you go—making your financial education both personal and practical. Ready or not, this is information that’s relevant to your life and your financial wellness. Here’s a list of questions to help get you started:
• Do you know how to create a monthly budget that includes basic expenses, bills, debts, and a way to save for long- and short-term goals?
• Do you know what your short- and long-term goals are, and do you have a timeline in mind for when you’d like to reach those goals?
• Do you understand how much it costs to carry the debt you have? Do you have a plan to tackle that debt?
• Do you know the difference between “good” debt and “bad” debt” and high- and low-cost loans?
• Do you know the differences between federal and private student loans, and the pros and cons of each?
• Do you know the importance of an emergency fund? Could you get through an unexpected life event (job loss, medical bill, car repair) without having to borrow money? And if you had to borrow money, do you know where you’d get it?
• Do you understand how compound interest works and how it can help you grow the money you save and invest over time?
• Do you understand the different kinds of investment accounts (a 401(k) vs. a traditional IRA vs. a Roth IRA, etc.), and the benefits and drawbacks of each?
• How much do you know about volatility, investment risk, and portfolio diversification?
Answering these questions might help you develop a foundation of financial knowledge. There are a variety of reputable online resources available to help you with your financial literacy journey.
Paying for College and Managing Student Loan Debt
Part of finding financial literacy might mean crafting a plan to help you pay for college. Federal aid is often the first source of financing for students applying to college.
Beyond scholarships, grants, and work-study, federal student loans come with set interest rates and a variety of benefits and repayment protections for borrowers.
When federal aid isn’t enough, students might consider exploring private student loans as an option to help make ends meet. If this applies to you, you could consider a private student loan with SoFi. There are absolutely no fees, the application process can be completed entirely online, and you can choose from one of four repayment plans.
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