While many students believe they know what’s best for their own personal finances, the reality is that this may not be the case. Recent research has shown that financial literacy has dramatically dropped in America in recent years, and a growing number of students are overestimating their financial knowledge.1
This is a worrying trend as financial literacy is an essential life skill that is necessary for success in today's world.
Our students are facing new financial challenges – from inflation to managing student loans, to creating a budget and planning for their future. It is essential that they have a solid understanding of financial wellness to make informed decisions that will benefit them in the long run.2
Unfortunately, many students are not receiving the in-depth financial education that they need.
According to a report by the National Endowment for Financial Education, only 17 states require high school students to take a personal finance course, and only five states require testing of personal finance knowledge.3
This means that it is up to colleges and universities to take it into their own hands and being to prioritize financial literacy education. It is up to us to equip students with the necessary skills to manage their finances effectively.
The results of this study are worrying, but it’s important to understand them so that we can fully grasp the situation and be able to provide the best help that we can.
The New Study On Financial Literacy Scores
The study, conducted by researchers at Ohio State University and published in the Journal of Financial Counseling and Planning, found that financial literacy declined in America from 2009 to 2018.
Despite this decline, more and more students are continuing to overestimate their financial knowledge, resulting in a significant gap.1
The researchers found that the percentage of people who believed they had above-average financial knowledge but scored lower than average increased from 15% in 2009 to almost 21% in 2018.1
This is a significant increase and highlights a growing issue in our society. It seems that students are becoming more confident in their financial knowledge, even though they may not actually know as much as they think they do.
The researchers also noted that although the surveys showed that the number of "don't know" responses increased between 2009 and 2018, respondents continued to rate themselves as having high financial literacy.
This means that many students are aware of their lack of knowledge but are still overconfident in their financial abilities.1
Why Are Scores So Low
So why is this happening? The researchers attributed this phenomenon to the decline in math skills and a lack of structured financial education. This is worrying because financial literacy is an essential life skill that is necessary for success in today's world.
Researchers also noted that the questions on the survey were less relevant to the lives of most students than they used to be. College students are at a crucial stage in their lives where they are transitioning into adulthood and facing new financial challenges.
Without proper financial education in the curriculum, students are unable to develop a solid understanding of personal finance, and then struggle to make informed decisions that will benefit them in the long run.
This means that it is up to colleges and universities to prioritize financial literacy education and equip students with the necessary skills to manage their finances effectively.
What Collages and Universities Can Do
As higher education administrators, it's essential to recognize the importance of effective financial literacy education and take steps to ensure that your students are receiving the education they need.
This should include not only basic financial concepts but also more advanced topics such as investing, retirement planning, and tax management.
So what steps can you take? Here are a few key things to start with:
- Core Curriculum: Administrators can make financial literacy a part of the core curriculum. This could mean creating new courses that focus specifically on personal finance or incorporating financial concepts into existing courses. Imagine discussing personal finance themes in a literature class or the role of finance in historical events during a history course!
- Workshops and Seminars: Administrators can organize financial literacy workshops and seminars. These events can cover everything from basic budgeting and saving strategies to more advanced investment and retirement planning. Bringing in guest speakers, like financial planners or investment advisors, can also provide students with valuable insights and expertise.
- Use Technology: Administrators can use technology to make financial education more accessible. Online courses, webinars, and mobile apps are all great ways to offer financial education resources to students on their own time. This makes it easier for them to learn about personal finance and to keep track of their financial progress.
- Create Partnerships: Lastly, administrators can create partnerships with financial institutions, non-profits, and other organizations that specialize in financial literacy education. These partnerships can provide students with access to expert guidance and resources, as well as potential internship or job opportunities.
Higher-ed professionals have a responsibility to prepare their students for success in all areas of their lives, including their financial future.
By prioritizing financial literacy education, you can help your students develop the skills and mindset they need to manage their finances effectively and set themselves up for a successful future.2
It's Time to Prioritize Financial Literacy
The study by Ohio State University highlights an alarming trend in our society, where more and more students are overestimating their financial knowledge while in reality, they know much less than they think.
We need to help students recognize that they may not know as much as they think, and help them take steps to educate themselves on personal finance.
Colleges and universities also need to prioritize financial literacy education to ensure that students are equipped with the necessary skills to manage their finances effectively and set themselves up for a successful future.
Using the best tools and resources can help, and that’s where iGrad Financial Wellness comes in. iGrad offers award-winning financial solutions to help colleges and universities get high-level financial education out to their students.
See how other schools have found iGrad to be the solution they needed.
1 - https://connect.springerpub.com/content/sgrjfcp/33/2/205
2 - https://sjes.springeropen.com/articles/10.1186/s41937-019-0027-5
3 - https://www.nefe.org/research/research-projects/completed-research/2022/effective-financial-education-best-state-practices.aspx