By Delana Miller
Assistant Director of Accounting, ASUN Center for Student Engagement
Today’s students have access to purchase virtually anything with just a few clicks. Whether it’s via mobile apps or online shopping, spending money has never been easier. This proves all too true for acquiring credit cards as well. With access to credit, the ease of spending, and the subsequent ease of accumulating debt, do students really understand the basics of personal finance and the impact of credit? Do they know the importance of establishing (and adhering to) a budget for their spending habits throughout their college years?
These questions arose after a conversation with a group of our student employees. We were discussing their spending behaviors (e.g. how they pay for necessities like books and housing and how they cover wants/unnecessary purchases like new clothes or entertainment). To my surprise, they stated that the majority of their unnecessary (wants) expenses were covered with credit cards. When I asked if they were aware of the impact of credit card usage on their credit score, I received blank stares in response. These juniors and seniors were unaware of the meaning of a credit score. Their questions included: “What is a credit score? Why do I need to know my credit score?”
This conversation concerned me and had me wondering about the extent of responsibility higher education may or may not bear for providing sound personal finance education. Sadly, the days of “HomeEc” (home economics) may be long gone in certain areas of this country. According to the Council for Economics Education (2016), only 17 states require a personal finance class in K-12 education. While access to higher education may also offer personal finance or economics course, some schools may on provide this education as an elective or may even be out of reach for some students due to their declared major. Yet there is much research that supports early exposure to personal finance concepts has a positive effect on money management skills for student (Huddleston, Danes, & Boyce, 1999).
For example, Peng, et al. (2007) argued that students who participated in personal finance courses in high school or college were more knowledgeable of investments. Robb (2011) concluded that students with greater knowledge of personal finance were more likely to be responsible in their credit usage. Robb (2011) went on to argue that college students with little to no knowledge of personal finance may be at higher risk for adverse economic effects of irresponsible credit utilization.
While we prepare students for professional careers, should we also bear some responsibility for preparing students for personal success and financial independence?
The answer is YES!
References Council for Economic Education. (2016). Survey of the States: The state of K–12 economic and financial education in the United States. Retrieved from http://councilforeconed.org/policy-and-advocacy/survey-of-the-states/ Danes, S. M., Huddleston-Casas, C., & Boyce, L. (1999). Financial planning curriculum for teens: Impact evaluation. Journal of Financial Counseling and Planning, 10(1), 26. Peng, T.-C. M. (2007). The Impact of Personal Finance Education Delivered in High School and College Courses. Journal of Family & Economic Issues, 28(2), 265–284. doi:10.1007/s10834-007-9058-7 Robb, C. A. (2011). Financial Knowledge and Credit Card Behavior of College Students. Journal of Family and Economic Issues, 32(4), 690–698. doi:10.1007/s10834-011-9259-y