Financial literacy, or the ability to understand and manage one’s financial resources to secure financial well-being, is a vital skill for students. In fact, research has shown that low financial literacy correlates to lower income levels. Although a number of higher education institutions are beginning to offer financial literacy education, it’s clear that many students are entering adulthood with large amounts of debt and without adequate knowledge of how to manage their personal finances. Understanding credit and its implications for future life goals is an important piece of financial literacy.
Advice from a senior financial planner
“The best time to start learning about managing credit is when you’re a student because it’s during this phase in life that it’s easiest to get into debt trouble. In conjunction with learning about credit and what creates credit, it’s important for students to learn about credit scores and how this particular score can affect their lives in many other areas, like buying a house or car, for example.”
—Kelly DiGonzini, CFP, MST, senior financial planner at Beacon Pointe Advisors in California
What students should understand about credit:
- What credit means
- How credit cards and loans work
- The importance of credit scores and how they can start building theirs
- The risks and benefits of using credit
What are other schools doing to teach students financial literacy skills?
Texas Tech University’s Red to Black Peer Financial Coaching program was recently named the nation’s best by LendEDU, an online company dedicated to student loan refinancing. The Red to Black program includes one-on-one coaching sessions, outreach booths, and presentations to teach students skills such as:
- Building and using credit
- Understanding student loans
- Choosing employee benefits
University of Montana requires every student to complete an interactive online financial literacy course called Transit. Transit covers:
- Credit scores and credit cards
- Avoiding defaults on student loans
- Savings and banking
- Insurance and taxes
George Washington University has a leading center for financial literacy research called the Global Financial Literacy Excellence Center. The center provides personal finance courses and resources for their students, as well as a series of seminars featuring guest speakers from around the country.
If your institution doesn’t yet offer financial literacy courses or services, consider how these might benefit your students.