Classes on how to get your own financial house in order are in high demand at U.S. colleges—even with business majors
Every semester, parents of undergraduates taking Finance 343 at the Olin School of Business at Washington University in St. Louis attend a lecture or two. They sit in the back and listen attentively as the professor speaks about things like saving for retirement, choosing the right life insurance, and investing savings.
Michael Gordinier, the senior lecturer in management who teaches the class to non-business majors, says parents tell him they wish they had had a similar course when they were 20. "Their kids are drawn to [the class] because they realize that their parents didn't get their act together soon enough, and they don't want the same trouble," says Gordinier.
Personal-finance classes—for business and non-business majors alike—are in demand among undergrads, who are looking to get a head start on their financial future. Olin's personal-finance course, which is about 10 years old, has grown from 80 students per semester at its start to 200 today.
A Growing Need
At Drexel Universityin Philadelphia, the last three times the business school offered a personal-finance course for business students, the sections, available to 25 to 30 students at a time, quickly filled up, at least once forcing the school to schedule an additional section. After requests from non-business majors to sign up for the class, administrators are considering creating yet another section for those with no business background.
And at Indiana University's Kelley School of Business, the sophomore-level Personal Finance course for non-business majors has grown over the past 10 years from 25 students per semester to 225.
The current generation doesn't just want to make up for the financial sins of their parents. They also find themselves in a more complicated world, with many more choices than previous generations had. Now people can go online and choose from a slew of insurance options, mutual funds, brokers, mortgages, etc. They pay more for their education—and just about everything else—and usually come out of school with lots of debt.
Advice for Living
Today's students have to evaluate potential employers based on the types of benefits they offer, and they know those employers might be checking their credit scores when evaluating them. In addition, people are living longer, and today's college students worry they could lack social services, such as Social Security, in their twilight years. All of this causes enough fear, say professors, that students are desperate for knowledge about personal finance issues.
Students say they're looking for practical, real-world information that has instant application in their lives. And that's what many schools are starting to deliver. These survival courses teach students about time, value, and money principles, different types of insurance, preparing for retirement or early death, taking out loans for cars, renting an apartment vs. buying a house, choosing a mortgage, investing in mutual funds or the stock market, declaring bankruptcy, and investing paychecks (from the very first one) wisely.
Many professors of personal finance feel it's their duty to share this practical information with young people. "It's sort of a shame that kids can graduate from college with things like music and art appreciation, which they will only use on quiz shows like Who Wants to Be a Millionaire?, and they don't have a clue about their personal finances," says Franklin Potts, an associate professor of finance at the Hankamer School of Business at Baylor University, who teaches personal-finance courses for business and non-business majors. "It's like sending the lambs to slaughter." The course Potts teaches was launched about 15 years ago at the request of parents who wanted their children to graduate knowing how to take care of themselves.
Bringing It Home
At Drexel, business students enrolled in Individual Financial Strategy have to do in-class presentations about whether they should buy or lease a car or if it's a good time for them to purchase a home, based on historical rates of interest on loans. Instructor Jodi Cataline says she wants her students to learn from the mistakes she made with money when she first graduated, which is why she shares stories about her past. "This information is about personal, day-to-day interactions you will have with money," says Cataline. "It's not just about corporate finance. Even business students have trouble."
Indeed, liberal-arts students aren't the only ones who benefit from personal-finance courses. Business students need this kind of education just as much as others, because they can go through entire business programs without ever learning about strategies for retirement savings or term and whole life insurance, says Andrew Lauck, a senior majoring in finance and international business at Kelley (see BusinessWeek.com, 11/14/05, "Thirty & Broke").
Navigating the waters after that first paycheck arrives can be tricky for someone with no prior knowledge of savings and investment. Lauck says most of his classmates are probably not thinking enough about retirement and won't know exactly how to handle the debt they'll have to pay off after graduation. His greatest takeaway from the personal-finance course, he says, was the realization that the spending decisions he makes today will affect his financial future 20, 30, or even 50 years from now.
Investing in the Future
In a way, students in personal-finance courses are staking claim to their independence. David Haeberle, clinical assistant professor of finance at Kelley, says he teaches students how to manage their personal finances and their financial relationship with their parents. In essence, he's helping them to cut the apron strings, something he says students are eager to do. "Kids today are interested in getting a head start," says Haeberle. "They know they will be off the coattails of mom and dad soon."
The fiscal future of U.S. families, in fact, rests with today's college students, many of whom will someday have children of their own. "With personal-finance courses, students can walk away and add value to companies and clients—and to themselves, too," says Lauck. That's one valuable lesson everyone could use before, during, and after college.