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Getting out of the red: New class will teach financial literacy

The Candor, Volume XXX, Issue 6 – week of October 6, 2008

By Fadi Shihadeh, EDITOR-IN-CHIEF

Cash is king, unless you do not have any. A new class offered by Benedictine’s College of Business hopes to help students establish good money habits and learn to manage their finances better.

Management 391: Service Learning  – Managing Personal Spending and Savings begins on Oct. 23 and runs until Dec. 11. The class will have students keep a constant journal of their spending and discuss their experiences. For the latter half of the class, students will go out to local schools as part of a program to teach younger students some of these financial habits. The class is not restricted to business or finance majors.

“It’s open to everybody,” said Vicki Jobst, instructor for the course. The course had beginnings with the Dean of the College of Business, Sandra Gill, Ph.D., who had expressed interest in promoting financial literacy for students. The materials for the journaling are coming from Alice Wood, who is part of Wealth Watchers International, which promotes financial literacy for corporations and individuals. Jobst met Wood at the Women’s Leadership Summit last year and wanted to find a way to incorporate Wood’s program into a class. Wood believes there is a lot of potential for these programs in the student market because the e earlier students start learning these habits, the better. It is especially important that college students are informed.

“You don’t want your parents to support you for the rest of your life,” said Wood of college students. Now is the time, she stressed, for students to be picking up the important habits that help them save money. “Everybody who’s in college should be acting like they’re poor because they’re not out there making a living yet,” she said. Taking this class, students will develop the correct mentality to approach financial decisions.

“We want them to have good spending and saving habits,” said Jobst. To help students along this path, students will journal their spending habits for the first couple of weeks so that they record how much they spend on a day-to-day and monthly basis. Seeing the numbers and having a running account balance provides students with a way to assess their spending as well as understand the consequences of every purchase. The journal also has students categorize each purchase so they can see how much they can compare the costs of eating a restaurant with eating fast food. Students will also set personal budgets and try to stick to them.

 

Educating others on finance

In the latter half of the course, students will go out to local schools to educate students on these financial lessons. This is the service learning aspect. Gina Dewald is part of the Chicago division of Junior Achievement, which will train the management class’s student in the skills they will need to teach financial literacy.

“Junior Achievement is the world’s largest organization dedicated to educating students in grades K-12 about entrepreneurship, work readiness and financial literacy through experiential, hands-on programs,” said Dewald. Each age group has a tailored program so that it is age-appropriate.

A team of specialists created the curriculums, which include learning critical thinking, making better decisions and understanding all the financial lingo. Each kit has activities, plans for the grade levels.

“The volunteers facilitate the curriculum” said Dewald. “This particular program that the students at Benedictine will be facilitating explores personal finance and students’ education and career options based on their skills, interests and values,” she added.

By learning these skills, students will strengthen their financial literacy and avoid some literally costly mistakes. Wood has previously organized focus groups and knows what kind of habits often end up hurting students. She says a big problem for college kids is overdraft fees, the fees that banks charge when someone withdraws more money that there is in the account. Students may not see the correct balance because often there is a lag time in updating their account balances. Those fees add up when students do not know their balance.

A couple other tips include finding alternatives for spending money such as packing a lunch instead of eating out, which can save a lot of money. See a movie at the cheaper theaters. Pick up instead of having restaurants deliver, start saving for retirement and learn from people who are better at spending money.

Another tip is that students should not waste their brains and money on things that are bad for them such as drugs and alcohol. Wood told an anecdote of a UIC student who did not even know he had a gambling problem until he went through the program and realized where is money was going.

 

A consumer culture

All three, Dewald, Jobst and Wood, emphasized the importance of starting from a young age. Wood found that families might not be equipped to teach children the proper nutritional and financial knowledge for making better decisions. Jobst also commented that some freshman advisers were worried about suggesting students take the class because it is a 300 level course but say that it is appropriate to any level of student. She added that the freshman year is the best place to start because students will then have this knowledge for the rest of their college career.

American consumerism is creating problems, evidenced most recently by the mortgage meltdown and the successive bank failures.

“For the last two years, consumer spending has outpaced after-tax earnings, and Americans carry approximately $2.5 trillion in debt, excluding home mortgages. This is the financial legacy we are leaving for our children, tantamount to writing a bad check that they will have to cash,” said Dewald.

“Americans are always maxing out their cards and overspending,” added Jobst. This debt culture is not healthy for the economy and these problems are being addressed by financial literacy programs like Wood’s. In the last twenty years, she pointed out, that overall percentage savings of disposable income have decreased to almost nothing while consumer debt is ballooning.

She said that there is also a correlation between the rise in obesity and the rise of consumer debt. Wood emphasized that being financially literate did not mean that one could not purchase anything expensive.

“The philosophy behind Wealth Watchers isn’t to be judgmental. The idea is you can have anything you want as long as you plan and save for it,” she said. With an economy in turmoil, there may be no better time than now to become financially literate.

The two credit class can fit 35 students and is filling up. Anyone interested can enroll through MyBenU and has no prerequisites. The class will meet at night from 6:30 – 9:30 p.m. on Thursdays.