Almost all college majors take some sort of business finance, business management or accounting courses. So why is it that so many college students wind in debt to their eyeballs and do a generally poor job of managing their own finances where 62% of millennials say they live paycheck to paycheck. Perhaps it’s because of the way the data is presented to the student. The student won’t have any issue buying a new iPad app or new phone but then have trouble making the minimum payment on the Apple Card.
I’m sure all these college courses in finance have assignments where the student must create some spreadsheets showing the financial status of a fictional company. So why can’t this skill be transferred to their personal life. It would just be so easy for economics, or accounting professor to give a semester assignment. Name it the Business of Me
Have the student keep track of all outgoing expenses and incoming revenue and assets. Then have them figure out if they can stay in business with the current financial practices. Give bonus points to whichever student increased their net worth during the semester. That would be such a more educational assignment than writing a report on applying the same formulas to some fictional widget maker.
Proper management of personal finance is one of the main factors that can lift a person out of poverty and level the playing field. But a lot of students never receive this type of education either in K-12 or college. Why is this the trend? Some schools teach a portion of this in economics or some other similarly named class, but for the most part, the people I have spoken to were never taught any of these things in school.
This is not just about budgeting and possibly balancing a checkbook, but it should, more importantly, include the use of credit and how that can work for you or against you. Since the internet, there is a lot more information about what affects a credit score. Still, a lot of the more unfortunate kids might now even realize they need to know what affects those Fico scores from Experian, Equifax, or Transunion. They sure do not understand the ratings received from sites such as Credit Karma are Vantage scores and not used by a lot of lenders.
Student Loan Debt
The news has had a lot of people talking about the amount of student loan debt in the United States, with people owing over 1 trillion dollars. It would be safe to assume that a large portion of that student loan debt is directly related to people who left their loans in deferment way too long. As a result, the compounding interest on interest has caused the deficit to balloon over time. Most people do not realize what this is causing them down the road, but at the same time, when most get out of school, they can’t afford to start paying on this right away, so they keep on letting it defer, and the lenders keep allowing them.
If the students were taught about debt with more than just a financial aid exit interview session of an hour or two, then perhaps there would not be all this debt hanging over so many individuals.