Financial literacy as a college graduation requirement

College Financial

The Value of Mandating Financial Management Courses

For the young individual just entering into the working world, the economic challenges can be considerable. For most, completing university schooling and moving on to full independence will deliver one into a tough job market, a recession economy and a relative frontier of predatory credit lending. Therefore, for those graduating school today and seeking work and survival, the challenges have never been greater to either one's wallet or one's personal sensibilities. Evidence suggests that college students and graduates will carry daunting credit card spending debt into their adult years, that the persistence of college loans will demand fast commitment to a paying occupation and that in many instances, graduates will have to set their sights lower in terms of living expectations. These conditions denote the need for students in general to enter into the world with a greater knowledge of financial management, practical economic concepts and the ability to resolve debt. Just as college claims to prepare its students for the professional and intellectual opportunities present in the world, so too does the onus fall upon the universities to provide an educational course which identifies the pitfalls that are also a principle trait of beginning one's professional life. Issues such as debt management, budgeting, saving and adjusting lifestyle parameters to fit one's means all are absolutely crucial to the individual's survival, success and social comfort. Therefore, it is argued here that financial management should be the subject of a mandatory course which will be required of all graduating students.

This mandate would help to realize the core need which permeates our universities to produce individuals who are not just versed in the scholastic education which emerges from textbook studies but who in addition are provided with the type of instruction that can ease the transition from student to citizen. This is important because, as research here tends to reveal, there is a mentality fostered by the experience of college which deemphasizes both the value of money and the imperative to begin saving or spending responsibly. For many students, the focus on learning in class and recreating on free occasions will promote a frivolous approach to dollars and cents which is distinctly cultural and environmental. This speaks to the development of a laxness toward money that is distinctly collegiate and which financial management courses should be designed to address. To this problem, Lazarony (2008) denotes of most college students that "they don't realize how much they spend on little things,' says Vickie Hampton, a financial planner and an associate professor at Texas Tech University in Lubbuck, Texas. 'That's the most common revelation.'" (Lazarony, 1)

The article goes on to argue that indeed, most college students have not either learned to appreciate the value of a dollar or, in a setting where many of the greater living expenses are addressed by one's parents or one's student loans, there can be formed the idea that making ends meet is not as difficult as it will actually prove to be upon graduation. This is to say that many do not recognize the implications of a reckless and unsustainable budget. With campus housing, tuition and meal plans often paid for in advance or through loans, many college students will develop spending habits that must be reversed before they leave school. The ability which many such students are given to spend freely on recreational items, entertainment and other non-instrumental purchases may begin to instill both spending expectations and lifestyle habits that can be hard to break.

However, all evidence suggests that this is largely a product of a full unawareness as to how financial conditions will present themselves to one outside the safe boundaries of the college. Many students do not learn when it is necessary to do so that there are myriad ways to manage money more sensibly with the proper sacrifices. Accordingly,

"Mark Oleson, director of a financial counseling clinic at Iowa State University, adds, 'Usually, just by tracking expenses, you'll start to curb expenses.'" (Lazarony, 1) The idea of recording expenditures, balancing checkbooks and maintaining a practical monthly budget all can help the graduate to understand and address a personal financial outlook with greater sensibility. All to often though, students neither realize this nor have the knowledge or understanding to approach financial management in this way. Therefore, it is of true merit to propose a mandatory course for the completion of one's studies that arms students with these instruments for management and empowers these instruments by making a case for their centrality in achieving a personal savings and regular spending budget.

All indications are that maintaining a sound and intelligently balanced personal budget can have substantial effects on the way one handles money, garners debt and prioritizes living expenses. This would be a primary area of focus for a mandatory financial management course due to its proven effectiveness. To the point, "living on a budget can open up your future as well. If you spend wisely and stay out of debt you can maintain a good credit score. With a good credit score you will be able to borrow money. This will allow you to go to school, go on trips, buy a house, and basically to do whatever you want." (Newman, 1)

This idea of maintaining a good credit score is also of essential importance in educating the student, who may not be aware of the significant effect which can be brought to bear by one's credit score. As one text denotes, individuals typically will not read or understand the fine print in their credit card contract agreements. (Usigan, 1) Accordingly, one of the biggest areas of concern for college students is that of credit card debt. Students will often lack the cashflow or income to meet the types of spending priorities which they will make for themselves. Either because their focus is drawn to their studies and prevents them from seeking part-time employment or because they lack the awareness to know the long-term implications, many students will spend their college years relying upon credit card spending. This is a way that many students accumulate the kind of bad debt that can follow them for years to come. This is an area especially where students must be educated if they are to enter the professional world on an equal competitive footing. As it stands, most students enter into this part of their life already held over by tens of thousands of dollars in student loans. While they must prepare to make important regular payments on these loans, students must also often work to redress the debts built by inadvisable credit spending.

This is an area of the utmost importance because many students are not fully aware of the damning consequences which can be the result of credit card ignorance. Indeed, "when it comes to applying for more loans, banks and other lending organisations will take a forensic look at all your personal finances. Every bit of borrowing, from store cards and credit cards to student accounts (with their overdrafts) and government loans will come up for scrutiny." (Doyle, 1) A mandatory financial management course would make as one of its primary focuses the subject of restraining credit card spending, would prioritize the process of paying off persistent debt and improving and would seek to stimulate the understanding amongst students of the serious and persistent consequences which are the result of a failure to reign in credit card usage.

This is important because it is not just the set of spending habits there promoted which can make college such a damaging period to one's future finances. Instead, this can help to set the pace for one an individual who may struggle to erase debt for many years following one's schooling. The individual who has not managed to limit or diminish debt may well enter into a scenario after school where these priorities no longer even seem feasible. To the point, "even when graduates enter the world of work, it doesn't necessarily mean they're able to watch their debts decrease,' says James Falla, managing director of Thomas Charles. 'They find themselves living and working with others who are themselves earning good salaries with high-cost lifestyles. Trying to keep up with these lifestyle expectations, combined with existing student borrowings, means that many graduates just get further into debt.'" (Hilpern, 1) This is to say that without the proper instruction or forewarning, many students will enter into the real world without the proper tools for undoing the damage of college spending. It is important that while still in college, upcoming graduates are warned that they may not stumble upon that high-paying dream job immediately upon graduation. This revelation will strike many students at a time when they have already become entrenched in a spending routine centered on living expenses, rent and entertainment. Much of the negative debt and personal stress there associated might be limited by demonstrating to students the importance of eliminating or handling hanging credit card debt before becoming entrenched in such long-term financial habits.

Education on managing or eliminating debt early in one's professional life should also be combined with realistic education on the state of the economy and the impact which this has levied on personal opportunities for financial comfort. To this point, individuals are not finding the jobs for which their education has qualified them, are not achieving a pay commensurate to what they anticipate are their living requirements and are unable to afford many of the fundamental instruments to healthy and intelligent living. Indeed, one source denotes that "in 2007, the Census Bureau estimated that there were nearly 8 million uninsured young adults (ages 18-24), making them the largest segment of the uninsured population. That problem is likely to be compounded with the rise in unemployment and lack of new jobs resulting from the current economic recession." (E-Health Insurance, 1)