Requiring Personal Finance

The WSJ has a point-counterpoint on requiring a personal finance course for college students.  First let’s agree on what requiring a personal finance course means.  It means that each school would make a decision to include person finance in what is often called General Education.  That is, a university degree typically includes General Education, required of all students along with college (assuming there are multiple colleges) and departmental requirements.  We would not support a requirement to force all schools to include personal finance but we would support any school that wants to include personal finance (PFC) as a requirement.

Professor Lauren Willis is arguing against requiring such courses.  Most college courses are three credits.  That means they meet for three university hours (50 or 55 minutes) each week for 14-16 weeks.  So each course is about 40 hours of instruction.  Lauren starts with the straw man that courses may not be effective.  As evidence she cites a study from India that had four percent of the subjects completing secondary school.  It hardly seems relevant to a requirement to complete college.  It is true, however, that no single college course is either 100% effective or comprehensive.  Students at almost every university complete a composition course but writing problems among graduates are so legendary that we don’t feel the need to cite any.  Requiring a PFC is not a silver bullet.  College courses are a start to wisdom.

Next Lauren throws up her hands at the challenges:

What’s more, even experts disagree about the right investment and retirement-savings strategies. Financial offerings change too quickly for regulators to keep up, never mind educators. In addition, compared with the salesperson across the table, consumers will never be as knowledgeable about financial products and services—or about the psychological maneuvering with which they can be sold.

Common sense thus suggests that college courses won’t enable people to make the kinds of financial decisions society currently demands.

Perhaps.  Our experience is that theses force isn’t that well educated but be that as it may, a better educated population will help with evaluating the pitches from government as well as the private sector.  The PFC won’t solve the problem but it will start some of the students on the road to wisdom.  They will drive the market and help (almost) everyone.

Next, Lauren considers the impact of exogenous events:

Making personal-finance courses a college requirement sends a message that financial success is largely the result of personal decisions. But government policies affecting employment, health care and benefits have a vastly greater effect than personal financial acumen on Americans’ financial health.

The first sentence is false.  Financial success, by and large, is the result of personal decisions.  We even know what they are even if we can’t find them right now.  It goes something get married, stay married, and start saving early.  Execution is the difficult part of financial success.

Government policies certainly can have a vast impact on American’s financial health.  We would expect that PFC would cover many of the difficulties caused by government policies.  Perhaps, among other things, it would lead to reforming Social Security rationally and sooner rather than later.

PFC will not solve all of the personal finance problems.  There is risk in the world and there are folks in and out of government that would mislead even the wary.  Folks have different risk preferences.  But PFC are a step in the right direction.  Some will be worthless but even those might cause a student to be interested in becoming informed.  These courses will help folks to become informed about financial decisions but they are just a start. Now if we can sign up Congress folks and the executive offices for PFC and some basic economics.  Of course, they need to apply it too.




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