Today I talked to a friend about the benefits of a 401(k). I have no idea if his company offers one, but it made me feel good that I can share a bit of personal finance information. It also made me think about the lack of personal finance education in high schools and colleges.
To be honest, if I haven’t stumbled into this VORTEX of personal finance-obsessed bloggers (I say that with love!), I probably wouldn’t know a 401(k) from my right foot. Or left foot. The internet provide excellent resources but it’s still not a substitute for personal finance education in the curriculum. It doesn’t even have to be a semester-long course – a series of 5 or 6 seminars would work just as well.
One 2-hour seminar each on credit card debt, student loans, car purchases, healthcare plans, and retirement plans would provide a baseline of understanding. Such a series would be so, so helpful for students about to graduate college (like me).
Many of my friends (being the smart and ambitious and awesome people that they are) are graduating with coursework in corporate finance, international finance, world-domination finance (maybe I made that one up). But there’s no class on personal finance. Knowing about the trade inbalances between U.S. and China might make interesting conversation, but setting up a 401(k) is probably more applicable to a recent grad’s financial future.
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I couldn’t agree more. Can I just tell you how clueless I’ve been on the whole subject (and I’ve been in the working world for three years now!)? Actually, I can’t–I was that clueless that I didn’t even know how clueless I was. Reading blogs I found linked on your site actually got me started on realizing this is important to figure out… and here I could have been saving a lot smarter for a few years and making my next big investment, law school, a little easier on myself. Oh well! Better a few years late than thirty years late (or worse, never)!
I think it’s in part because there would be no one to teach the class. They offer this type of course at community colleges, but at a university or liberal arts school, the instructors are all professors of an academic discipline. There simply is no discipline that covers personal finance — it’s actually part of home economics. 50 years ago, balancing a checkbook and making a budget was part of home ec class, along with cooking and sewing. I think that’s still where they belong. College isn’t about learning practical life skills, it’s about theories and papers and pure academia. I graduated college not knowing how to cook, either, but I certainly don’t think it was my school’s responsibility to teach me that.
Note that I’m in full agreement that all people ought to have some kind of pf education — I just don’t think it belongs in college. Partly for the reason described above, and partly because I think the people who don’t go to college deserve to learn about finance too! Plus, since time is our best asset, the earlier you can learn about these things the better. I’d love it if they brought home ec back to high schools. Just think how much you’d already have in your IRA if you’d known to start saving 6 years ago!
Strangebird – the good thing is that you’re getting started now. but it’s kind of frightening how quickly the pf blogosphere and grab hold of you!
Wendy – I agree the college is mainly for theoretical knowledge, but it’d be a great service to students (like me!) if my school could offer some non-credit seminars on personal finance. I think a majority of students would find it helpful and attend. We have non-credit classes for law school preparation, networking, etc. why not add personal finance to the mix? One of the problems I see with home ec in high school is that it’s not academically rigorous and probably alot of students would pass on it in favor of AP classes. But still I think non-credit classes would be a good idea. Although I don’t know if many 15-year-olds want to sit down for 2 hours to learn about 401(k)s.
My college actually did offer a non-credit seminar on personal finance-but those who took it didn’t need it, as always.
I also find myself explaining to friends things like the differences between traditional and Roth IRAs, or the reasons to itemize or not itemize your taxes. I never used to know any of that, and it’s kind of awesome (and…kind of makes me feel like a freak, at the same time).
I wouldn’t favor a college course on personal finance, but I’d certainly be in favor of college-sponsored workshops. In fact, I think that’s a great idea.
When I was in college they offered a course in personal finance, but I wasn’t about to shell out 4 credit hours of tuition to take it! I simply bought the book for the course and read it myself. Basic personal finance is not rocket science, afterall.
I think Heather’s comment rings true: When you make personal finance education voluntary, the people who don’t really need it (i.e. already know it) will be the only ones who’ll take it.
For those curious about the book, it was:
The Under 40 Financial Planning Guide: From Graduation to Your First House
by Cornelius P. McCarthy
I can only recommend this to someone who has very little personal finance knowledge. If you have the basics down it will be a boring read. However, it does do a good job of surveying all the major facets of personal finance including insurance, credit cards, loans, basic investing, etc.
Great post ! I have to agree with Heather though – while I was a student, if my school did offer a non-credit PF course/workshop, I would probably walk right past it and not even notice. There’s got to be some other way to get students involved…
BTW, khudos to you – I think you are well ahead of the game by starting while you are still a student. I only got around to all this after I got a job offer and someone told me to “look at the whole package including the 401K and other things, and not the just the salary” !
English Major – I’m not quite clear on the itemize/non-itemize thing – care to enlighten?
I guess since I’ll be doing my own taxes next year, I should figure it out!
Toby – thanks for the book suggestion. I’ll keep it in mind.
ispf – thanks for your encouragement.