Money smart students are more likely to graduate

Higher education seems to be in the midst of a “perfect storm” about money. A recent report from the Bill and Melinda Gates Foundation revealed that money management problems were the number one reason for college dropout. Added to this fact is the growing discussion in the media about student loan debt. And the third point of this storm comes from the hard to measure, but certainly ballooning number of parents and students asking the simple, but bold question about higher learning:  “Is this worth it?”

As intimidating as this perfect storm might seem to institutions closely watching their enrollments, there is much that student affairs professionals can do to ease the concerns of incoming students and parents by incorporating personal finance education into existing programs.

A 2011 study by the National Endowment for Financial Education (NEFE) on the importance of financial education documented a “snowball effect.” The study found that exposure to financial education exponentially increases the likelihood that students will pursue more financial education as time goes on. 

A 2014, 65,000 student survey by EverFi and Higher One confirmed the NEFE’s findings about the importance of incorporating financial literacy. According to USA Today, who published the results of the survey in an April 2014 article, students exposed to financial literacy “did better on the survey's financial knowledge questions, were found to be more averse to debt, more likely to pay credit card bills on time, and less likely to go over their credit limit.” 

Finally, a 2011 study conducted by credit card giant VISA found that 82 percent of parents believe personal finance should be a high school graduation requirement. 

The growing student loan problem, backed up by the above studies and more, leave little argument against incorporating financial literacy into a higher education programs. Yet some institutions are still reluctant to adopt a program.  The typical enemies of time and cost always lurk nearby, but with personal finance education some of this reluctance is due to a widely held belief that students simply don’t care. 

While many required financial education programs deliver the results stated in the surveys above, inspiration, entertainment, and real world action items are often the missing components. When evaluating a personal finance education program, whether it is an online program, a guest speaker, or in classroom curriculum, schools should give considerable weight to the fun factor. 

Programs that incorporate games, and provide specific action steps for everyday financial occurrences, such as checking credit scores, car buying, and apartment hunting, are far more effective than those that dwell solely in the realm of theory. 

The silver lining in personal finance is that it easily answers the timeless student question, “when am I ever going to need this?” Programs that provide not just information but the resources to solve financial problems that students are currently facing will quickly turn financial education into financial action. 

These resources can come in the form of checklists, self-evaluations and template financial forms, such as a letter to send to a credit bureau to remove a mistake from a credit report that can be customized for a student’s particular situation. (It is estimated that 70 percent of Americans have a mistake on their credit report that is not their fault.) 

Specific resources, such as the aforementioned credit bureau letters, coupled with practical financial lessons that focus on immediate action steps, such as checking credit scores, provide students with the “instant gratification” side of personal finance. The feeling of accomplishment on a particular financial task puts a shine on the duller sides of personal finance education.

There is no doubt that students need more financial education. There is also no doubt that parents want to see money management curriculum in higher education.  Now is the perfect time for schools to step up and offer such curriculums; a perfect time to face the perfect storm.

About the author:
Peter Bielagus is an expert financial educator and founder of the country’s first financial planning firm for young people. He has delivered more than 500 presentations on money management to college students in 49 states (hint: Alaska) and eight countries. He is the author of three books on money management for young people and has appeared in the Wall Street Journal, USA Today, and on the PBS Special “Your Life, Your Money.”  Peter is the creator of Financial Fundamentals for Students, a new self-paced online financial literacy course from the National Center for Student Life, designed to help students build financial health and avoid the financial messes that can derail important life goals like college graduation. For more information, visit www.FinancialFundamentalsforStudents.com.