It may come as a shock, but you’re probably not as financially literate as you should be. I’m not talking derivatives or accounts payable or anything like that- I’m just talking about the most basic of concepts that many college students fail to understand. Ideas such as investing, proper use of credit, and budgeting seem to be the last thing on students’ minds when they should be considered on a daily basis. A recent study by Money Matters on Campus revealed that 28.2% of college freshman own a credit card. Yet a subsequent Charles Schwab survey showed that only 26% of students understand how credit card companies access interest rates and fees. So there is clearly a growing portion of students with the opportunity to handle credit, yet they don’t know the mechanics behind it.
There is an epidemic of financial illiteracy from today’s school system that needs to be drastically changed. More finance classes in high school should be added. In addition, at a collegiate level it is my opinion that a required course for any major includes at least one semester of personal finance. This would increase student’s comprehension of basic financial terms and tools that they can use to help better themselves outside of school. Besides, considering almost 40% of students don’t graduate, this one class they took their freshman year could end up being critical in their future financial success.
To paint this more clearly, A USA Today poll showed that only 14% of those high school seniors and college freshmen questioned understand that stocks are the highest growth option in the long term. Most picked savings account or government bonds.
These same people will go on to take in student loan debt, acquire credit cards, and live on in financial ignorance until they are in over their heads with a leased car, a sub-prime mortgaged house, and credit card payments. Furthermore, how many of these people do you think will be consistently investing in their retirement accounts? Even today, retirees only have enough savings, on average, for 10 years of retirement. Do you want to run out of money when you’re 75 with no job and slim income prospects? To secure our financial futures it is imperative that we begin understanding our finances at a young age, and I feel a personal finance college course would significantly change the direction we are headed.
