When you hear the words “personal finance,” you get one of two reactions: either your heart leaps for joy because you’ve found your calling in life, or your heart sinks because the subject is too boring for you to bear. But sooner or later, you’ll come to realize that personal finance focuses on more than just handling money and budgeting wisely; it’s about your future car, your future living arrangements, and, of course, taxes.
A recent report by Forbes Magazine has revealed that millennials do not possess enough financial literacy to confidently handle their finances on a day-to-day basis. Consequently, students graduate from universities as doctors, dentists and engineers without realizing the importance of paying bills on time, maintaining a good credit score or focusing on investing and saving for retirement.
On top of this, CNN Money reports that nearly 40 million Americans owe a total of $1.2 trillion in student loan debt, which surpasses all other types of debt. And with a lack of financial literacy, students enter the workforce unprepared to tackle their loans and are unaware of how factors such as interest rates function. It’s understandable that many students across the country can’t bear to face their loans. I suppose it’s OK if you’re a freshman entering college for the first time, but you’ll really be wiping tears from your eyes if you wait till graduation to unveil the mystery number.
A personal finance course should be required in high school so students can enter their university with more confidence and a greater understanding of how to budget and balance the cost of books, tuition and personal expenses. Unfortunately, the Council of Economic Education, a national organization, reports that as of March 2014, only 17 states required high school students to take courses that integrate elements of personal finance. Out of those 17 states, only four make personal finance an obligatory stand-alone course necessary for graduation. Thus, students are left to wander through the deep, vast unknowns of the world and learn some of the most important life lessons through trial and error. I don’t know about you, but I don’t fancy the thought of sitting in the bank, twiddling my thumbs, while my mind hangs on unfamiliar terms like “line of equity” or ponders the difference between IRA and 401k.
A study by the Program of International Student Assessment (PISA) in 2012 showed that more than one in six students are not financially literate. The Council for Economic Education is working with states to rectify this problem, but there remains a generation of students with minimal knowledge on personal finance, and outside of tax season, managing your expenses and tracking your spending becomes your responsibility.
So, what to do? Well, for starters, if students have a chance, they should take a personal finance course. Unfortunately, it is not a general education requirement, so most students will not be exposed to this critical subject. But it ought to be, so students no longer enter the world with the false notion that personal finance is just about pulling out a piece of paper to outline where every penny is spent. It teaches you about insurance and loans and why taking out store credit cards can potentially hurt your credit score, despite the immediate perks they tend to promise.
Personal finance may not be as exciting as watching the latest sitcom, but learning how to manage your finances and understanding monetary terms are vital in this day and age. At some point, we’ll appreciate the value of understanding finance sooner or later, or when you’re sitting across from the bank clerk while he starts talking about mortgage premiums, and all that’s going through your mind is, “I wonder if it’s too late to sign up for a personal finance course?”
