For a majority of college students, heading off to school will be the first time they’ve had to make financial decisions on their own.
Being able to do so equipped with the right information and skills is important.
Unfortunately, many arrive on campus unprepared.
A recent FINRA study (2018)1 found that those aged 18 to 34 were doing worse on a 5-question financial quiz than they did in 2009. In 2009, 30 percent of this group could answer four out of five questions correctly. In 2018, that number dropped to 17 percent.
Without the proper financial education, students are more likely to make unhealthy financial decisions that will lead to money problems and affect them for years to come.
Colleges and universities are critical keys to helping their students achieve financial wellness.
Here are five main financial literacy trends to consider.
1. Mandatory Financial Literacy Courses
In 2019, the Financial Literacy and Education Commission released a report2 showing the state of financial literacy among college students.
One of the main recommendations was that colleges begin offering a mandatory financial literacy course for their students.
The reason behind this recommendation was two-fold. First, the rising cost of getting an education meant more students needed to take out loans.
As of the fourth quarter of 2020, 44.7 million Americans have $1.71 trillion in student loan debt.
Just as importantly, sixty-nine percent of the graduating class of 2019 took out student loans amassing an average of $29,900 debt, with 14 percent of parents taking out an average of $37,2003.
The second reason for the recommendation revolves around understanding student loan debt and how it impacts long-term financial wellness.
Based on their findings, the commission is concerned that students and their parents do not understand the long-term implications of taking on student loan debt, how the debt is to be repaid, and whether the degree being sought will be sufficient to repay the loans.
This finding is supported by the results of quiz takers.
Credible4 found that nine out of 10 parents and students failed the six-question quiz.
The trend to require some type of financial literacy course in college will help students and their parents make better financial choices.
2. Use of Peer Educators
Peer-to-peer counseling is used in a variety of subjects because it is an effective method to help people relate to the content being learned.
When it comes to financial matters, college students are more likely to listen to and be influenced by peers.
Ohio State and Valencia began these programs and found that students who entered into peer counseling came out with5:
- A better understanding of their financial standing
- More awareness of debt
- Less likely to default on student loans (Valencia rate dropped from 20.3 to 14.9 over two years)
Good places to find peer counselors are through the business school, FBLA, student government, or Greek chapters.
Once recruited, these peer counselors should have training on the topics and know how to find additional information as needed.
3. Integrating Financial Literacy into Core Classes
In some colleges, financial literacy is finding its way into several of the required classes to provide opportunities for students to practice the skills they are learning.
Whether teaching a quantitative or qualitative course, professors can use personal financial examples to help solidify financial concepts in students’ minds.
These can include such things as:
- Planning a fundraising project
- Teaching students about career opportunities
- Educating students on entry-level salaries for different careers
- Including personal finance management examples into math or quantitative courses
- Teaching how soft skills like motivation, determination, and discipline are necessary to achieve financial security
To get a better understanding of your students financial needs, check out How to Develop a Student Financial Wellness Survey.
4. Talk About Financial Literacy More
Most colleges and universities talk to incoming and outgoing students about student loans.
However, financial literacy is needed throughout a student’s college career, and they need information on more than loans.
Students need to repeatedly hear information concerning the financial decisions they are currently making and will make upon graduation:
- Debt reduction
- Credit cards
- Student loans
- Financial aid opportunities
- Work/study jobs
- Bargain shopping
- Using coupons
What’s the best way to distribute this information? Email, text, social media, flyers, and even refrigerator magnets.
The point is to remind students about personal finance and how their decisions affect their time at college and beyond.
To read more on this, check out College Financial Literacy 12-Month Promotion Calendar
5. Provide a Financial Wellness Program
The Financial Literacy and Education Commission stresses financial literacy, but financial literacy on its own isn’t very successful.
It is not until students understand personal finance and are given the tools to make appropriate decisions and change attitudes that real change occurs.
For instance, a student can understand how student loans work and still make poor choices about student loans if not given the skills to evaluate their ability to repay the loan.
That’s where financial wellness programs come in.
These programs focus on teaching practical financial skills and strategies that students can use in their day-to-day lives.
For example, with a financial wellness program, students not only learn about budgets but are given the skills and strategies needed to follow the budget, save money, pay off debt, and establish credit.
A holistic financial wellness program for students offers:
- Personalization – students create a profile and are guided to information needed for their situation
- Gamification – students interact with information in fun ways, collecting points, receiving certificates, and even getting prizes
- A wide variety of courses, tools, and evaluations
As students interact with a university-sponsored financial wellness program, they have the opportunity to learn financial skills and put them to immediate use.
1 - https://www.marketwatch.com/story/americans-financial-literacy-skills-have-plummeted-since-the-great-recession-2019-06-26
2 - https://home.treasury.gov/system/files/136/Best-Practices-for-Financial-Literacy-and-Education-at-Institutions-of-Higher-Education2019.pdf
3 - https://www.federalreserve.gov/releases/g19/current/default.htm
4 - https://www.credible.com/blog/student-loans/test-your-knowledge-student-loan-interest-rates/
5 - https://www.pbs.org/newshour/education/can-students-improve-financial-management-with-help-from-peers