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Financial Education Hold Keys to Financial Wellness

A lack of money management skills and habits can stand in the way of college students’ future financial independence

We've got some actionable tips to help you tackle student loan debt.

Almost everyday, Phil Schuman, executive director of the Office of Financial Wellness and Education at Indiana University, speaks to students with varying levels of financial literacy and wellness, terms he describes interconnectedly. Financial literacy, he says, deals with understanding financial terminology; financial wellness, on the other hand, is essentially how those terminologies and understanding them apply to behavioral perspectives into your own life. But this knowledge also plays a role in your financial decisions.

“I think it's really important that students have an understanding of the financial world that exists because it is incredibly complicated,” Schuman said. “When they graduate and start to earn full-time incomes, if they aren't already, there's going to be a need to understand the financial world so that they can make decisions that will be in their best interests moving forward.”

Despite the value of understanding your personal finances, how to save, spend and invest your money, financial education is not a mandatory course in many colleges.

Students Struggle with Money Management

Of 2000 college students surveyed, less than 10 percent took a personal finance course, with most picking up on money management skills through personal research and from their parents and guardians, according to College Pulse Insights.

Furthermore, 67 percent of student respondents aren’t even sure if such a course exists at their schools, while 21 percent are aware of an optional class or program. Just 8 percent say their school requires a class or program in personal finance.

With this lack of formal financial education, surveys have found that little more than half the population is financially literate with many struggling to manage their finances.

Learned Financial Literacy

City University of New York student Rani Persaud attributes a portion of her confidence in her level of financial knowledge to an optional financial literacy module her school held in collaboration with JP Morgan Chase & Co. The political science and international studies major attended a Zoom event where she learned the importance of having credit and budgeting wisely.

“When I reflect on the presentation I attended, I was surprised to see so many other students like myself in attendance with similar questions or stories,” Persaud said. “Personally, it highlighted the importance of courses like these, especially since we were allowed to have our questions answered and [...] I didn’t feel like an outsider looking in because terms were explained, scenarios were given and overall no one was condescending.”

Guilty of impulsive buys, Sangeeta Lilman, engineering science freshman at Suffolk Community College, believes in not only the importance of having a mandatory financial literacy course but one that acknowledges the different variables in each person’s life.

Yet, creating a mandatory college course on a subject that is so personal to each individual's life would be no easy undertaking.

Financial Education Is Not One Size Fits All

There is no one size fits all when it comes to financial education, said Paul Goebel, director of the Money Management Center at the University of North Texas as he explained to Pepperdine University’s Graphic Media. “Financial literacy means different things to different people,” Goebel said. “Any financial literacy program needs to address the proactive student seeking to be more diligent with their budget and the reactionary student in crisis mode looking for options.”

Furthermore, it’s imperative for any personal finance course to provide a clear and objective overview of financial topics, expand the knowledge people have of the available options and make time for participants to ask questions about their own personal financial situation confidentially so that they can address their personal questions and apply the knowledge they’ve learned without fear of judgment, said Phuong Luong, CFP, facilitator for the Boston University Financial Planning Program.

“I’ve seen personal finance curricula make value judgments on how people should spend their money,” Luong said. “Unfortunately, this can make people feel judged or ashamed of their or their family’s financial situation, and feel as though the content isn’t for them.”

Given these challenges, Schuman sees one of the first steps in creating such a course to create a task force to determine what financial topics are deemed most important for students to know once they graduate and best practices in delivering the information.

What to Know About Your Personal Finances

As vast as the topic is, Luong believes some personal financial topics that may be helpful for college students to know include: how to keep their personal financial information secure and safe, how to open and use checking and savings accounts, how to keep track of income, expenses, savings and debts, how to set up a payment plan for debt, how to review and negotiate an employment agreement, how to prepare and read a basic personal tax return and how and where to seek unbiased and accurate financial advice when they have questions about their personal finances.

Financial education is undoubtedly lacking in the U.S., evidence showing that even experience with a personal finance course in high school does little to impact students’ financial knowledge levels in college.

Of over 30,000 college students surveyed across the U.S., 53 percent said they were least prepared to manage their money in comparison to their confidence in managing their time, finding resources, staying organized and keeping up with their coursework, according to an EVERFI study. When asked basic financial questions, referencing topics such as credit history and student loans, student respondents answered an average of only two of the six questions correctly.

The case for a financial planning college course is clear but the path to creating one that best suits the needs of all students is less than obvious. Thus, in the interim of not having a mandated financial planning course, students can seek the advice of financial professionals and instructors like Schuman and Luong, financial aid counseling from their respective financial aid offices and even get peer to peer financial coaching from organizations like Texas Tech University’s Red to Black and Ohio State University’s Scarlet and Gray Financial.

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💡Tip for tackling student loan debt:

At the Office of Financial Wellness and Education, Schuman sees lots of students who are student loan averse because of the negative attention it has received over the years with many students coming out of college with staggering student debt. But Schuman says student loans aren’t bad; overborrowing and taking on more debt that you need is. When loan averse students gravitate to working more hours to avoid taking out loans, it often isn’t the best case scenario they’re looking for with the extreme work hours potentially pushing their academics on the back burner and causing their graduation timeline to falter. Instead, Schuman suggests having conversations with your family about how much you actually need to take out in loans. “Don’t just take the full amount that's offered to you because that's where you can dig yourself into a hole,” Schuman said. “You just need to be as efficient as possible as it relates to borrowing.”

Pooja Rambaran is a freelance writer and recent journalism graduate from Toronto Metropolitan University. She’s written both news and feature articles for outlets like the Review of Journalism, The Eyeopener and Her Campus-Toronto MU. Covering topics ranging from current affairs and education to mental health and social impact, she hopes to continue to grow as a journalist for many years to come.