Adrianne Gore, a junior in the College of Arts and Sciences at Washington University in St. Louis, recently opened her second credit card account. Unlike many college students, this was not an act of desperation that will leave her riddled with debt. Gore is following the advice of her personal finance course.
However, despite their growing popularity, courses like this cannot be found at a majority of universities. So, while Gore is becoming literate in the financial vernacular of APR rates and portfolio management, the majority of college students will not have their financial act together by the time they enter the real world.Michael Gordinier has taught this course at Washington University's Olin School of Business since 2003. It is only open to non-business school students in their junior or senior years. According to Gordinier, it is one of the better-attended and most-requested classes and has grown to around 200 students. Students from the business school, who cannot take it for credit, often audit the course in order to get the information.
"This is a course that is meaningful to take at a transitional place in your life," Gore said. "It is a lot more applicable if you take it your junior or senior year when you are actually thinking about things like [how to] pay for a house or credit cards or a car. Before now, all those questions were just mysterious things that adults did that you never knew how to do."
Gore opened the second line of credit in order to make her debt to credit ratio smaller.
"Professor Gordinier told us that your debt to credit ratio plays a big part of your credit score," she said. "That's what lenders look at to see how much [credit] others have extended to you, and how little of it you actually use."
She found a credit card with a good APR rate using bankrate.com and now tries to pay the full balance every month.
A report by Ohio State University claims that students who took personal finance courses did not end up saving more money. However, Gore already sees herself making changes to her everyday spending and saving. So, the question remains why personal finance has not become standardized across the university system.
"[Some professors] view such courses as beneath their dignity," Gordinier said. "Sort of like trade school ... figuring out insurance and retirement plans is not intellectually stimulating enough. It's way too practical." Gordinier thinks that people at the university level should realize the academic integrity of personal finance and not dismiss it as trade school banality.
Gordinier has had his own financial planning practice since 1991 and has seen the same scenario time and time again -- by the time most people become worried about their financial futures, it will be extraordinarily difficult to save enough to reach their goals. Due to this, Gordinier focuses much of the course at Washington University on the time value of money so that students realize the importance of starting to save early.
"Even if you don't have a lot [of money to save], delaying opening a retirement fund 10 years can shortchange you $200,000 or $300,000 in the end," Gore said. Since the start of the semester she opened a second savings account with a higher interest rate.
"I've definitely made some financial changes," she said. "I always looked at [my income] as spending money. Now, I am putting so much more away -- some aside to an emergency fund and also to a permanent savings account."
A majority of American parents remain worried that their children will not be able to support themselves once they graduate college. A 2008 survey by the Hartford Financial Services Group found that 55% of parents with children aged 16-24 voiced concern over their children's ability to become financially independent without monetary assistance from them. While the number of colleges offering personal finance courses is growing, few schools have made it a mandatory part of the curriculum. This fall, Bentley University (which already focuses on business education) added a personal finance segment to the required First Year Seminar course. There are no liberal arts schools with such a requirement.
Despite the old adage that people are motivated by gain, Gordinier finds that people are actually more motivated by pain.
"If you tell them 'if you keep doing what you're doing now, you are going to be eating beans and living in a cardboard box with a candle' ... they realize the time value of money," he said. "This creates pain, which then creates action."
Gordinier sees practical incentives for schools to implement personal finance courses and promote smart saving techniques.
"I saw a lot of very intelligent people being trained in college on how to make money, but the level of financial ignorance was astounding to me," he said. "If students becoming financially successful and can trace that success back to the [personal finance] class at school, they are more likely to give money back to the school."
Each semester, former students contact Gordinier to thank him for helping them save money or get out of debt. Despite this, he says his goal is not to turn all the students into financial planning experts.
"[The course] gives you just enough info so that you can interact with a financial planner and become an intelligent consumer of this highly specialized advice without getting ripped off or burned," he said.
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