Every year, hundreds of thousands of students graduate with Bachelor’s degrees, entering the work force for the very first time. For most of these students, it is the first time they will ever earn a steady salary and be responsible for their own personal finances. However, this transition from school life to professional life is not overlooked. Most universities, Drexel in particular, emphasize teaching valuable career skills to undergraduates so they can enter into the work force with confidence. While there are a lot of resources spent on teaching students interview, resume writing and presentation skills, there is no formal teaching of personal finance matters. Yes, it is important for students to secure full-time employment in order to begin the next chapter in their lives; however, education should not stop at this point. Education at the tertiary level across the country currently fails to prepare students for managing their newfound income after they graduate.
According to Forbes, just over 1.6 million Bachelor’s degrees were given out in 2010 — most of which were students entering the work force, and undoubtedly mismanaging their money. The lack of personal finance teaching in universities across the United States is not a small or isolated problem, but in fact contributes to the misfortune of many. The education I am advocating for goes beyond how to write checks and what bank account to open, but rather extends to modern day tips that yield monetary benefits.
There are simple personal finance concepts that result in large savings down the road, concepts that recent graduates would benefit enormously from learning early in school. For example, 401(k) accounts, employer sponsored retirement accounts that many new graduates open when beginning their new job, have great saving advantages. With such accounts, employees are responsible for contributing some of their paycheck before taxes into their fund in order to save for retirement. In addition, most employers offer some sort of match program that will match employee contributions up to a certain threshold, commonly 5 percent of an employee’s gross salary. Because few students ever learn in college about how 401(k) accounts work, let alone the mechanics of match programs, they often don’t contribute up to the match threshold. By just contributing the threshold amount, a new graduate would essentially double their retirement savings at no additional cost. This is an incredible benefit for the future, one that is unfortunately often forgone.
While 401(k) match programs are just one specific example, there are numerous other tips that yield great benefits for the future of new graduates, benefits that are largely missed due to the inadequacy of personal finance education. The impact of learning personal finance tips on students’ financial futures will often outweigh 10 hours worth of class time in any core academic subject. For this reason, I propose that Drexel University begin an important trend and establish a mandatory one credit, 10-week course similar to their co-op 101 class to inform students in their last year of studies about various personal finance issues. This class would spend some time on the basics of personal finance such as the benefits of saving via diversification, how to budget appropriately and how to use debt responsibly. In addition, this new class would also provide ample time for teaching specific tips such as always contributing the employer’s match amount in a 401(k) account, the tax benefits of opening a Roth IRA and how to automate the majority of one’s personal finances. Personal finance is often treated as an unimportant, boring subject, yet its teachings have a profound impact on new graduates’ lives, rivaling any other subject learning while attending university.
Trevor Nederlof is a senior majoring in finance and economics. He can be reached at [email protected].