Leaving home for the first time to attend college can be an overwhelming experience for young adults. Aside from the sheer cost of tuition, one challenge that many freshmen face is how to handle their finances. From understanding student loans to opening lines of credit to budgeting for everyday expenses, unprepared students can encounter a sharp learning curve and many pitfalls.
Jonathan Bauchet, assistant professor of consumer science, says freshmen year is the best time to teach students how to manage their finances. Photo by Mark Simons
A new course being offered in fall 2015, CSR 103 (Introduction to Personal Finance), is intended to provide students with many of the basic principles that are useful in managing and planning personal financial matters, as well as key tools needed to avoid common mistakes.
"Freshman year is a great time to equip students with practical tools they need to manage day-to-day finances and longer-term financial plans," says Jonathan Bauchet, assistant professor of consumer science, who developed the course with continuing lecturer Michael Roe, extension specialist David Evans and other colleagues in the Department of Consumer Science. Roe says, "It's clear that many students could benefit from an introductory course like this, especially so they don't make mistakes now that could take years to fix."
Crushing debt
One of the goals of the new course is to help students understand the different ways to finance large items and to manage any debt, both of which are key to making college more affordable.
According to Forbes (August 2013), college debt is becoming a serious issue for many families: Two-thirds of students graduating from U.S. colleges and universities have some level of debt; the average debt for students with debt is $26,600; and student loan debt reached a new milestone in 2013, crossing the $1.2 trillion mark in aggregate.
According to Purdue's Division of Financial Aid, about 45 percent of Purdue students graduating in 2012-13 had some level of debt. That's among numerous reasons that increasing the affordability and value of a college degree are key components of President Mitch Daniels' Purdue Moves initiatives.
Bauchet says, "We want to help students understand the different ways to take out loans and identify potential problems when applying for loans and managing credit. That means helping students learn to compare interest rates and familiarize themselves with common loan conditions."
Roe says, "We want to show students how to make more responsible financial decisions and take ownership of those decisions."
Practical solutions
The new course will include two lectures and one recitation session each week. The lecture topics will include budgeting; calculating and filing for income tax; managing credit; investing wisely; managing risk; taking advantage of employee benefits; planning for retirement; and learning about financial planning careers.
Michael Roe, a continuing lecturer in consumer science who helped develop the course, has decades of experience as a financial planner. Photo by John Underwood
"We are going to provide students with a solid foundation of basic financial knowledge and very practical solutions and tools to help them better manage their personal finances," Bauchet says.
Roe, who has decades of experience as a financial advisor, says the real-world exercises in the course will empower students to make financial decisions in an informed manner. Those decisions could include buying a house, planning for retirement or choosing among benefits provided by an employer.
In addition to the practical financial tools, the course also will examine what Bauchet calls the "psychology of money management."
This part of the course will look at how our thought processes impact our financial decisions," Bauchet says. "Sometimes we get attracted to things that are new, pretty or shiny, and make decisions that are not in our best long-term financial interest. We want students to better understand the psychology of financial decision making so they can avoid some common mistakes that could seriously hurt their finances, now and later on down the road."
Supportive alumni
Kathleen Longo (CSR '92), president and founder of Flourish Wealth Management, believes the course is a great first step for students to learn how to handle their finances in a responsible manner.
"It is especially helpful to have tools early as the knowledge builds at each of life's stages and empowers good financial decision making," Longo says. "They will better be able to understand how short-term decisions can have long-term impact on their overall finances and life goals and will realize the value of savings and starting early."
Rosella Bannister (HE '55), who served as director of the National Institute for Consumer Education at Eastern Michigan University, says the course also serves as a platform for Purdue's efforts to produce new graduates who are ready to move the world forward with their education.
"Purdue graduates will be prepared to take active roles as citizens in promoting fairness on societal issues that affect the financial well-being of individuals and households — issues such as access to affordable higher education, health care, employment and income equity," she says.
The new course also will briefly explore career options in the financial planning sector. Longo says, "For those in this class who discover that they are drawn to this profession, they will find that it is a rewarding profession that is expected to grow."
