Teaching young people — and their parents — how to better save and spend their money is a critical component to increasing college-going rates in the U.S., warned a panel of experts who spoke this week at the National Association of State Treasurers meeting in Salt Lake City.
According to panelist Margaret Clancy, director of the College Savings Initiative at Washington University’s Center for Social Development, it is not enough anymore for K – 12 students to be financially “literate.” To break the cycle of college-going rates being so directly tied to demographics, said Clancy, we must as a nation concentrate on a broader goal of financial “capability.”
Financial “capability,” in Clancy’s view, is both a step beyond financial literacy and a leap beyond simply having the wherewithal to pay for whatever bills may come one’s way.
“One cannot achieve financial capability without first having achieved financial literacy,” said Clancy. “But financial capability also means having access to safe financial products that are accessible, affordable and easy to use. This access constitutes a certain financial inclusion that allows a young person, and their parents, to be confident that they can achieve their life dreams, without going broke in the process.”
Clancy’s call for financial capability offered a ray of hope in an otherwise disquieting session that focused on the many barriers to college attainment in the U.S., and the very low high school graduation rate that squeezes the college pipeline before it reaches the end of 12th grade.
Striking in the clarity of his remarks on the challenges in the K – 12 system was panelist Dan Domenech, executive director of the American Association of School Administrators, the single largest group of individuals who run public schools and school systems across the country.
“If financial literacy is a necessary step on the path to financial capability,” then we have a real problem,” said Domenech, a former superintendent himself with more than three decades of experience in K – 12 education. “While most teachers are familiar with the term ‘financial literacy,’ their own personal knowledge of it is not well-defined, nor do they rate themselves highly on either the topic itself or their ability to teach it.”
A third panelist, Angela Baier, chief marketing officer of Colorado-based College Invest, added that more than three-fourths of parents in the Rocky Mountain State acknowledge that they are their children’s primary source of personal finance education.
However, Baier said, Colorado parents also note that they feel “less prepared to give their teens advice about investing than they do about sex.”
(Full disclosure: I was the fourth panelist at this event, and I feel ill-prepared to talk to my teens about either investing or sex.)
What is the level of “financial capability” in your family? What is your view on how this problem can be addressed by all the stakeholders in higher education, including parents?
Lexi
I have completed three years of undergraduate studies at Manhattan College. Due to my parents poor financial planning I am no longer attending Manhattan College, and I have no access to my transcripts which are needed for me to transfer to ANY college. Currently, I am over $50,000 in debt. I have no possible co-signers for any loans, and am ineligible myself. During my time at Manhattan College my father lost his job, “found religion”, and decided to start a non-profit organization with my mother donating food for the needy. In the process they became the needy and are now surviving off of donations, and minuscule unemployment which will be running out shortly. I am now working at my supermarket making minimum wage to pay off my debts. I have saved up enough money to continue my studies take one class at my community college. I currently would like nothing more than to continue my education.
I was always reiterated the fact that I can attend any college I want, the college of my dreams, no matter what. I think many parents hold this philosophy that college should come at any costs, but this perception needs to change. If I had any idea how much money my parents were actually making I could have used this information in my application process, doing simple things like avoiding colleges which were 5-10 times what my family could realistically afford.
The growing need for education on this topic is exceptionally rising, and this concern is something that can be conveyed to students by guidance counselors. In addition parents need to become aware of this fact, and have access to information sessions on the topic of affording college. If I had any idea that I could be 22 and working at a supermarket instead of fulfilling my health care profession due to financial incapacity, I would have simply chosen a public school.
Sazzad Hossain
Thank you Lexi for sharing your experience with us. Like you, many other students are sadly faced with the experience of debts and having not enough funding to continue their education further. I am currently a student enrolled in the Higher Education Opportunity Program. When I started my application process, I had no idea what the program was about and how it would help me. Thanks to the help of my guidance counselor, I am now in a great private institute having very little loans (from room and board).
After my first year of college, I began to understand how this program was helping me fulfill my educational needs. I began talking to my relatives and friends about their college experience. Many stated they have begun seeings $20,000 and more in loans just from their first year. I was astonished because I only had about $3,000 which I took out to pay for room and board. I told them about the program and how they could have qualified for the program. Each of them did research and found out they were fully qualified for the program both academically and financially. But it was too late for them to apply for the program at all. The main reason for them not applying to the program was mainly because they did not know of the program. There was not enough information on the web, advertisements, or in any college fairs.
After doing my own research and barely coming out with any information, I decided to purchase a domain. I paid for all the services needed and started HEOP.org. With the help of a few friends, I fully developed the website and advertised it in many ways. Within months, my server was overrun with visits and my e-mail inbox filled with questions regarding HEOP.
My experience from this program was amazing. I have and am still receiving amazing support financially and academically. Counselors from the institute that I am attending is very helpful and have helped me through thick and thin. I am very thankful to them.
Sadly not everyone appreciates my help in spreading news related to this wonderful program. I have received notices from the state and several institutes with complains and “bad eye.” They see this as identity theft and a method of making profit. It’s not! It does not nor was it my intention to steal their identity and we barely make any money form this site. Whatever we earn from ads only cover a portion of our server costs. The rest, I pay from my pocket. I wanted to spread the word of this wonderful program. And I will continue to serve the upcoming generations with more and more information regarding programs such as HEOP. In fact, we have recently started a new project that provides information regarding another wonderful program called EOP (SUNY).