FINANCIAL literacy

Many states now require money lessons for students

Financial literacy courses are becoming more popular on college campuses, with some higher learning institutions even requiring students to learn personal finance basics such as taxes, mortgages, budgeting and banking.

Twenty-one states now require students to take a personal finance course, according to the Council for Economic Education.

“The goal of the classes is to provide a rigorous knowledge and understanding of the principles at the basis of financial decision-making. As we teach corporate finance, or how firms should manage their money, so we need to teach personal finance because people, too, need to know how to manage their money, now more than ever,” said Annamaria Lusardi, professor of economics and accountancy at George Washington University School of Business in Washington, D.C.

“Economic literacy helps prepare students to be active, engaged economic citizens,” said Anand R. Marri, dean of Teachers College at Ball State University, Muncie, Indiana.

While economic literacy should be taught before kids get to college, middle and high school teachers are often “overworked, underpaid and lack the resources and training,” Marri said.

“For the longest time there’s been an assumption that you were learning personal finance from your family, but for many of today’s students that’s not true. Lots of students come to campus never having seen a checkbook or written a check,” said Dameion Lovett, program director in the office of financial aid, University of South Florida Tampa, which offers a voluntary financial literacy program as well as a financial literacy module course for incoming freshmen.

“The first time kids learn about FAFSA (Free Application for Federal Student Aid) is often when they sign up for FAFSA,” said Marri, who advises parents to teach children about money as soon as possible. “Even a kindergartener can learn about finances and money.”

Taught through a college’s business school or housed in a school’s financial aid office, financial literacy classes cover standard topics related to earning, saving, consuming, borrowing, investing, insuring, comprehending risk and go-to sources of information, Lusardi said.

While in college students are already making financial decisions, such as which meal plans to choose and how to manage expenses for books and other costs, Lusardi said. Immediately after college graduates need to decide where they can afford to live and how to deal with the pension plans offered by their employer, among other things, she said.

University of South Florida’s personal finance planning program employs a peer-advising format that trains students to teach their peers how to manage money and credit, deal with financial challenges, ease the transition for international students or finance study abroad.

Mounting student loan debt is a main reason why schools need to step up to help students understand personal finance.

“Many of them have taken on student loans to go to college, and they need to manage and repay those loans once they leave college,” Lusardi said.

The average student loan debt is $32,731, according to the Federal Reserve. At $1.6 trillion, total student loan debt is the second largest loan market after mortgages, Lusardi said.

“Many studies, including my own, show that students do not know much or understand what they have signed up for, and there can be consequences of mismanaging these loans not only for themselves but for society as well,” she said.

Financial literacy is more necessary now more than ever.

“This crisis (COVID-19) has shown how critically important it is to have some financial knowledge so we can be more resilient and can navigate through these difficult times. It is during a storm that sailing lessons show their worth,” Lusardi said.

“The goal of the classes is to provide a rigorous knowledge and understanding of the principles at the basis of financial decision-making. As we teach corporate finance, or how firms should manage their money, so we need to teach personal finance because people, too, need to know how to manage their money, now more than ever.” — Annamaria Lusardi