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Preparing Our Students for Financial Responsibility

Preparing Our Students for Financial Responsibility
By Dr. Clive Muir

The multicultural services director at one of America’s leading research

universities couldn’t believe what had happened to a prize student. Everyone thought Tim (not his real name) had it together. He had held highly visible positions in minority and majority student organizations. He dressed smartly, carried a briefcase — not a book bag — and lunched with senior administrators on campus. He graduated with a high GPA and obtained a competitive internship in Washington, D.C.
But when he arrived in Washington, Tim realized that he had prepared himself in every way but one. His finances were a mess, and that closed many doors, literally, in his face.

Landlords denied his applications due to poor credit scores. With no savings and maxed-out credit cards, he could not make necessary security deposits or live as comfortably as his colleagues. He depended on friends and relatives for assistance.

On a visit to his alma mater, he urged the multicultural services office to offer personal finance workshops, so other students could spare themselves the embarrassment that he went through.

The financial problems facing college students have merited attention from college administrators, lending agencies, the media and even credit card companies. According to Nellie Mae, the federal student loan program, more than three-quarters of undergraduate students have credit cards, while 43 percent have four or more cards. Nearly 25 percent of students are $3,000 or more in debt, while many students graduate with $7,000 or more of credit card debt hanging over their heads.

Minority students fare worse than their White counterparts. Minority students are generally more dependent on grants and student loans to pay college expenses, and many of them are first-generation college students. They have little first-hand experience juggling tuition payments, car loans, rent and day-to-day expenses. And when finances are tight, they are less able to turn to their parents for help.

Add to that the pressure of maintaining a contemporary lifestyle in our materialistic society. As a result, their chances of missing payments and amassing debt increase. One of my students confided that he fell heavily into debt trying to impress a girl. He had bought a $30,000 car and spent lavishly, then had to declare bankruptcy at 23 years old. In fact, minority students are more likely to drop out of college for financial reasons rather than academic ones.

Financial literacy training must begin in the freshman year in order to help students anticipate and overcome many of the economic pressures they will face throughout college and afterwards. They often come from homes where financial matters are handled in secrecy, and where they were not held accountable for their spending habits. We need to teach them the basic concepts of budgeting, opening savings and checking accounts and depositing checks rather than using check-cashing services. They must also learn to manage credit, as mistakes made in college could hamper their transition into careers and their ability to acquire mortgages and business loans.

Another step is to teach the leaders of student organizations about fiscal responsibility. This not only entails managing the organization’s budget and lobbying student government for funds, but also minding their own spending habits. So often, we hear about mismanagement of club funds due to personal indiscretions.

On a broader scale, financial literacy will enable students to understand the economic contexts of family and community life. In our mission to prepare students, we must teach them that deferring consumption is crucial to building wealth. Study after study show our students as loyal consumers, but lagging way behind as asset builders.

o be sure, basic attitudes about finances will change slowly, but such steps in the long run can help students like Tim exude confidence when they venture into the marketplace. They will leave college knowing that they have taken care of their personal business and are ready to take on the other challenges of their professional and personal lives.

— Dr. Muir is associate professor and director of the Leadership Institute at Winston-Salem State University in North Carolina.

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