It is not that being aware of money management, personal finance and budgeting can guarantee success in life but ignorance of all the aforementioned concepts can come with a great cost. As long as financial literacy is concerned, the United States of America always gets a failing grade by one count. The US ranked 14th during a global study which was then conducted by Standard & Poor’s Ratings Group in the year 2015, where the financial literacy rate was 58%. A possible solution would be colleges requiring their students to opt for personal finance classes. But would that help?
The accountancy and economists are of the opinion that in order to survive in the present financial era, it is necessary to have enough knowledge on personal finance. So, if they start taking personal finance classes in colleges, this will gradually bridge the gap.
Financial ignorance carries a hefty price
Are you thinking of driving? There are speed limits on the roads everywhere to make sure traffic is orderly and every driver follows the road rules. Wherever there are difficult turns, there erect signs to warn you. Whenever you allow someone to sit on the driving wheel, don’t you make sure whether or not he is familiar with the basics of driving?
If you extend this type of thought to the financial world, you will ultimately understand the importance of personal finance in colleges and universities. You must be aware of what can happen when young people juggle between high-impact monetary decisions without having the right amount of financial knowledge. For instance, student loans are the second largest portion of consumer credit market just after mortgages. With the soaring student loan debt, it can be easily said that the lion’s share of debt sits with the millennials and students remain extremely worried to pay off those loans.
There have been several studies which confirm that majority of the students are heavily unaware of how student loans even work. More than half of them even take out such loans without calculating the payments. As student loans are usually taken to complete education, you should at least have the minimum knowledge of managing debt.
Lack of financial literacy is more than a personal issue
Lack of financial literacy is almost similar to the lack of driver’s license and it is more than just a personal issues. This is extremely dangerous for the economic health of the country. You must remember the Great Recession which was mainly driven by terms of loans which consumers failed to comprehend. Young adults who are saddled due to student loans will be less likely to buy homes and cars. Their credit ratings will also be hampered.
The biggest reason behind having personal finance and literacy classes in colleges is to teach students that time is money. So, if you want your young adult to focus on increasing his financial knowledge, get him admitted in a college which provides this kind of education to their students.
