My View: College grads: Become financially literate
May 2nd, 2012
06:28 AM ET

My View: College grads: Become financially literate

Courtesy Rhodes CollegeBy Richard Fisher, Special to CNN

Editor’s Note: Richard Fisher is executive-in-residence at Rhodes College in Memphis. He has spent more than 30 years advising high-net-worth individuals and managing global portfolios.

I hope the job market improves this spring for college graduates, but whether they find employment or not, many young Americans with degrees in hand are plagued by questions about student loans, personal investments and credit scores.

I am teaching at a fine liberal arts college where very smart students in a variety of disciplines lack sufficient financial literacy skills. Indeed, across the nation, there are relatively few courses offered in personal finance, and they are nearly always electives.

That’s why I decided to teach a few years ago. I’ve spent a career in finance and investments, so I wanted to use my expertise to help college students make every dollar count, especially in this economy.

It’s really no surprise that college students don’t feel that financial literacy is important. Managing their personal finances is one of the few things that Americans seem to be willing to do without an understanding of what they are doing.

The 2012 Consumer Financial Literacy Survey, conducted by Harris Interactive, reports that only 43% of Americans have a budget, 33% don’t pay their bills on time, more than half never check their credit scores, and nearly 40% carry credit card debt from month to month. Ironically, nearly half of American say they learn about personal finance from their parents or at home, but 80% admit that they could benefit from advice from a professional.

Would we approach our health care decisions this way?

My message here is that financial literacy is nearly as important as that sheepskin. What good is landing a job after graduation if you spend the next decade or two digging your way out of various financial obligations? Being financially literate means managing one’s finances proactively, not learning through trial and error.

College students need to know how to budget, manage debt, approach investing in a disciplined way and set up a retirement account. These are skills woefully absent in some American households, so I also encourage students to bring their learning home.

Students should not just talk about these issues in class. My students actually analyze the real difference between buying and leasing a real car or investing in a specific mutual fund. They interview CPAs about tax issues for the newly employed or married. They research online brokerage firms.  They study how to avoid identity theft, and they search the Web for tips on living frugally.

This spring’s graduating class should know that “What you can’t measure, you can’t manage.”

For example, in 2009, seniors graduated with more than $4,100 in credit card debt, according to a national study by Sallie Mae. If only college students could measure and thus understand how credit-card interest accrues, I’m sure fewer would become mired in credit card debt. They would avoid bad credit like the plague if they realized that it means paying higher interest rates and insurance premiums and that employers sometimes won’t hire them if they have bad credit.

A recent report by the Consumer Financial Protection Bureau shows that federal and private student loan debt has shot past the trillion-dollar mark. All graduates should learn how to manage that responsibility, too.

And when graduates start working, most are ill-equipped to handle a fundamental responsibility: how to choose investment options for their 401(k) plan.

Today’s college graduates are just starting out, so I urge them to think about a disciplined approach to investments. It’s never too early to heed such advice.  I suggest that students discuss with their parents how the family unit quantifies and manages risks in an uncertain investment climate. Those of us who are approaching retirement have seen our portfolios contract in the recession, so the lesson here is universal.

My hope is that more college students graduate completely disabused of the notion that money takes care of itself and that more will be lifelong learners in personal finance.

The opinions expressed in this commentary are solely those of Richard Fisher.

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soundoff (11 Responses)
  1. Carolina

    Great post. Professor Fisher's Personal Business Finance class was hands down the most useful class of my college career. His practical teaching methods help students learn the fundamentals of managing their own money so that they are confident in making critical decisions on their own. More students should take a class like this in college if it is offered because the information you will learn is invaluable for the future.

    May 7, 2012 at 11:18 am |
  2. Carolina

    Great post. Professor Fisher's class was hands down my most useful class in college. Thanks to his practical teaching methods, I feel confident about managing my own money for the future. More college students should take a class like this because its practical information you fail to learn otherwise until you need to know it later on, when it might be too late.

    May 7, 2012 at 11:15 am |
  3. hamsta

    Maybe someone needs to tell obama to become financially literate.he spent billions bailing out chevrolet.chevy would not have been on edge of bankruptcy if they didnt build junk.i couldnt drive my brand new chevy for 3 months without a serious 200000 miles i went through 5 engines and 4 transmissions.if the problem was me i would have burnt the clutch up.the junkyard tells me the factory clutch wasnt even halfway worn at 200,000 miles.i bought a used toyota 10 years ago and it hasnt been in the shop for anything other than tires oil change and brakes in 235,000 miles.i will never buy another chevy but i have towed hundreds of chevys to the shop with my toyota.chevrolet stands for:Chatters Heavily Every Valve Rattles Oil Leaks Every Time and toyota stands for:TOwing YO Trucks A$$. obama should have let toyota buy chevrolet because chevy is still making junk. THIS IS BEING TOLD TO YOU BY AN A.S.E. MASTER AUTO TECHNICIAN WHO HAS BEEN CERTIFIED FOR 18 YEARS.

    May 2, 2012 at 9:45 pm |
  4. hamsta

    @college grad you are wrong that a 17 year old isnt educated enough to know when someone is feeding them a load of the age of 17 i knew college would be a waste of time.thats precisely why i told my counselor she was full of crap in 91 and went to trade school.i spent exactly 14800 on tuition and books to learn automotive technology.i graduated as an a.s.e. master auto tech in i am a crane operator/ mechanic,diesel mechanic,welder and fitter,air conditioning repairman,construction mechanic residential,commercial and industrial,and electronics and computer repairman.all the others were self taught and i am certified in most.needless to say in the last 20 years i have spent less than 2 weeks without a job.

    May 2, 2012 at 9:18 pm |
  5. Randy

    Might want to add: Stop graduating with music, art, history, art history, music history, musical art history, English, etc degrees and expect to get hired by big companies (unless you are looking for a mail room job).

    May 2, 2012 at 1:19 pm |
    • College grad

      Exactly correct! It's a waste of time with these degrees because they are meaningless degrees. Fortunately many companies just want to see a B.A/B.S. of some sort and they don't care what it's actually in – my scenario (insurance). But we all need to stop with this "follow your dreams" scheisse. Your dreams won't pay the bills unless you happen to be one of the fortunate ones with the right talents at the right place and the right time. I don't think it's the right place or time for most people right now though, so get a degree that actually teaches you something you can use!

      May 2, 2012 at 2:10 pm |
  6. College grad

    I wish I would have read this at 17 when the private university told me to, "just sign here and here and don't worry about that big 80k student loan debt because you'll be making so much money when you graduate with this fine liberal arts degree that it will be pennies in a pond..." what a load of BS! My parents didn't know any better either and cosigned for this. Don't get me wrong, I've learned my lesson the hard way, never missed a payment though, pay my bills on time, make almost 60k a year, but let me tell you...60k does not cut it when the school coerces you into signing your life away to Sallie Mae for the next 25 years. My wife and I can barely make ends meet here in southern California where rent is minimum $1500 per month for two people. Fortunately we bought a small house outside of LA in the mountains where nobody wants to live and got our mortgage down to $1100, but nonetheless, I would have opted for trash man or any trade over college, or would have at least taken the federal loans instead of the private ones had I known then what I know now. College is a scam and so are greedy schools and financial aid departments. A 17 year old is not educated enough to make these decisions under so much pressure and misguided advice from a school that only cares about money. I could have googled my whole education in 6 months, and I'm dead serious. Biggest waste of money ever. My advice, don't go to college, learn a worthwhile skill, and don't let the system make you it's indentured servant for the prime of your life. Living with regret sucks. Learn from me!

    May 2, 2012 at 1:18 pm |
  7. Justin Lyon

    Reblogged this on School Refresh and commented:
    A critical, but absent learning standard.

    May 2, 2012 at 1:12 pm |
  8. sweet kitty

    When I was in school we took a class about personal finance and that was while I was in junior high in the 80's. We made a budget with a madeup income and balanced our bills and purchases. We learned about writting check, now it is debit accounts. Anyway the instruction I recieved was of great value to my financial desicions. By the time I was 35 I owned a home outright, owned a car, boat had max company match going into my 401k. Now I 43 with retirement and a hefty savings account to hold me above water should we ever get into a tough situation or lose my job. I can not say any of this would have been accomplished with out that training. I was clueless about finances and savings before I took that class. My parents had lived pay check to pay check with no savings, retirement and no clear home mortgage. I think every student should be required to take this or something simular.

    May 2, 2012 at 11:40 am |
    • Tom

      I agree. Mandatory educationat all levels.

      May 2, 2012 at 12:36 pm |
      • Tim

        Most important knowledge there is in this world and we do not educate. Why is that? The ability to understand how to secure, save, invest, spend and plan money is what anyone with wealth understands and has. We complain about the money people have when it is actually the knowledge of money that is more important. Take a successful persons money away from him so he is equal with us all and he will again wind up having more as we have less. We are marching for the wrong thing. Rather than marching to be given the result of knowledge, we should be marching for the knowledge itself so we, too, can become more financially secure and pass that information to our children. Why are we given the scraps of excess and not taught the means to build our own wealth? One might want to ask that question while demanding mandatory financial education starting in middle school through high school- a full semester a year.

        May 2, 2012 at 12:41 pm |