When was the last time you sat down and really took a serious look at your personal finances? Hold on a minute. I am not trying to scare you off. Before you decide to move on to something less important in your life, please understand this: I am not a certified financial planner. I am not here to sell you any products. I am writing this column because I care about the readers and want to broach this valuable subject to help shine a light on what I believe is a national crisis.
Ultimately, I want to provide you with a free resource to help you or someone close to you who wants to get their personal financial act together. The Sokolov-Miller Family Financial and Life Skills Center at Penn State was created for that very purpose. So relax and read on.
This is a subject that I am passionate about as I believe in financial education for all. My research and experiences tell me that as a nation, we are pretty bad at keeping our financial lives in order. Here is a recap of some facts from my book that I have shared in this column before: 78% of Americans live paycheck to paycheck; 69% of Americans have less than $1,000 in savings; 56% of Americans have less than $10,000 in retirement funds; 45 million people owe $1.6 trillion in student loan debt; the average college graduate in Pennsylvania owes a little more than $36,000 in debt, the highest in the country, according to Douglas McIntyre with 24/7 Wall Street.
A recent study by CNBC found that only 29% of Americans report that they are “financially strong,” or that they are spending, saving, borrowing and planning in a way that will ensure long-term success. Additionally, 40% of all U.S. households carry credit card debt, with an average debt of $9,333!
The subject of money management is a pet peeve of mine as I am a huge advocate for financial literacy being taught in school. I was inspired to write this column after a friend sent me this link about the state of North Carolina voting to require a personal finance class in high school.
I don’t understand why every state doesn’t do this. It’s common sense to teach students about “common cents.” Financial literacy should be mandatory in high schools. Period! Pennsylvania Gov. Tom Wolf did just sign into law a bill that would allow personal finance classes to count toward graduation, but it stopped short of making it a requirement.
Why am I such a strong advocate of making financial literacy mandatory? Because it passes the common sense test. I am passionate about history, too, so don’t get me wrong. However, I am also a Pragmatic Passioneer and believe in the practical value of ensuring people are educated about money as well as any other subject. I know there are people out there who will insist that this be taught at home. They proceed from a false assumption that everyone comes from a stable home with parents that actually understand money themselves.
My passion for helping others to learn more about money management led me to Penn State’s Sokolov-Miller Family Financial and Life Skills Center. I recently reached out to Daad Rizk, the Executive Director of the Center. Daad is one of the most passionate individuals you will ever meet. Her enthusiasm for spreading the word about financial literacy and developing life skills is abundantly apparent from the get-go.
“I have always worked in education whether it was financial aid, the bursar’s office, or on the business side of a University,” Daad said. “I have seen the entire process that the student goes through and have seen the same things over and over again. I would see kids who couldn’t afford school who were borrowing way too much money. I’ve always helped with financial literacy without it even being labeled as such. I saw the advertisement for this position, and I said, ‘That’s my job!’”
Some of the themes Daad found repeated over and over included the over-borrowing of student loans, lack of budgeting skills, and an instant gratification mindset.
“Students would borrow more than they needed to cover educational expenses and would spend the rest impulsively on personal items,” Daad said. “They mistook their loans for income. They spent their money quickly and came back to borrow more.”
She saw the lack of budgeting skills in students and parents alike.
“It broke my heart to see kids get cancelled out of classes because they simply didn’t have the funds from the beginning to complete a four-year degree.” She kept asking herself, “What can we do to get the students and their parents to understand their financial responsibilities?”
So, she created a pilot program at Penn State for financial literacy in February 2013. The program started out in the World Campus in Outreach and Online Education. She spent the next two years researching with students and staff.
“We created an advisory board to bring all the stakeholders together including the financial aid office, student activities, student government, faculty and staff and alumni,” she said. “There are 14 representatives in all. We created a website with modules and programs. Once it went live, we started getting overwhelmed with interest and requests. We were able to add an additional full-time staff member under the guidance of the Financial Literacy Advisory Board and the Enhanced Educational Pathways Committee.”
Daad then wrote a proposal to create a financial literacy center. “We provided the data that showed the need.”
Then on Oct. 8, 2016 in a meeting, with Provost Nick Jones, it was agreed that the center would be assigned to Undergraduate Education and relocated to Grange Building next to the HUB-Robeson Center.
“I can’t thank Provost Jones enough for being innovative and supportive,” Daad said.
On April 20, 2018 Penn State Alum‘s Rick and Susan Sokolov made a philanthropic gift to endow the Sokolov-Miller Family Financial and Life Skills Center. I know Rick and Susan Sokolov personally and can’t thank them enough for their commitment, innovative thinking and their generosity.
Daad and her advisory board turned the curriculum into services, including classes, one-on-one meetings, peer mentoring, online webinars and self-study modules. Some of the modules include budgeting, credit cards, student loans, identity theft, debt management, taxes, saving and investing, mortgages, insurance and retirement planning.
Penn State President Eric Barron and Daad Rizk
Freshmen learn about the center during New Student Orientation. But as you can imagine, they are drinking from the proverbial fire hose at that time and it’s easy for the programs offered at the center to be pushed to the back burner. Daad made sure the “FInLit” site is linked to all of the most visited and critical websites for students, including the bursar, financial aid and undergraduate education, among others.
However, Daad also mentioned that, “You can lead the horse to water, but you can’t make it drink.” It is up to students, parents and staff to utilize this invaluable resource.
Who has access? Penn State students? Check. Faculty and staff? Check. Alumni? Check. The general public? Check... Wait, are you telling me anyone can access these programs? Yes!
Why is it open to anyone? According to Daad, “We wanted to help anyone interested in becoming more financially savvy. We look at this as great goodwill from Penn State to the world.”
There is even a high school student module to help prospective students to determine the financial options for paying for school.
Daad told me that for students to have a positive experience in college they have to feel comfortable and confident psychologically, mentally, socially, academically and financially. Unfortunately, the financial part is sometimes grossly overlooked. (Remember that 45 million students owe $1.6 trillion in student loan debt.)
“Families must take a holistic approach to college decisions,” she said. ”They must be ready, willing, and able to handle all the moving parts.”
So here it is, free of charge: https://financialliteracy.psu.edu. All it will cost you is your time and attention!
The results have been impressive. Participants from 148 nations have taken advantage of these programs. More than 34,000 distinct individuals have done more than 54,000 sessions and there have been 120,000 page-views. The self-study modules are the most visited, and 1,300 people have visited the new peer mentoring site.
The most frequented topics? Per Daad, “Number one by far is budgeting and student loans are second.” They’ve found 61% of the visits come from females with 39% coming from males.
Penn State does offer a few classes on the subject of money including The Mathematics of Money (Math 034), Money and Banking (Econ 351) and Professor Jim Miles’ Personal Finance class (Fin 108) in the Smeal College of Business.
Jim Miles proposed financial literacy as a required course to the Faculty Senate and was actually ridiculed by some colleagues in other colleges. “Their belief is that personal finance is ‘beneath college level work.’ ”
Considering the state of money management in the country as a whole, I would heartily disagree.
Jim did caution me about when to introduce the subject to kids. “You have to be careful how young you start teaching money management because too often kids don’t have any real financial responsibility so the concept can seem abstract and not relevant.”
Jim is a big believer in advocating for students to be taught self-control and delayed gratification. He cites the Stanford University “marshmallow experiment” (a study on delayed gratification) as a great way to predict future financial success. Jim believes that students need to understand that building account balances gives you choices. For instance, if you don’t like your current job and you have funds saved up, you have more mobility and options to consider alternatives. The importance of having an emergency fund, building a nest egg, understanding your credit score, and having a retirement strategy are all critical concepts.
Jim is a strong advocate for personal responsibility and accountability. In fact, he recommends that you don’t borrow money unless you’re desperate. He gave a “net worth” example saying that just because a person makes $200,000 a year you can’t assume that they have a higher net worth than the person making $50,000. If the person making $200,000 a year is living a “status” lifestyle by maxing out credit cards, living “house poor,” and spending more than they make every year without saving, they will be far worse off financially than individuals who live beneath their means and consistently save 20% of each paycheck.
Jim also gave the example of a Blair County couple where the husband worked as a skilled tradesman and his wife owned a small shop for 40 years. They lived comfortably but modestly and were really committed to saving. When they passed away, they left several $50,000 gifts to various local charities. But what really shocked the locals in town was that they left “several” million dollars to their church! No one in their community had any idea they had that kind of wealth. For more stories of this nature I suggest you read Thomas Stanley’s “The Millionaire Next Door” or the recently released follow-up, “The Next Millionaire Next Door.”
Both Daad and Jim are, like me, kindred spirits when it comes to educating people about personal finance and money management. If you really want to get your personal financial act together, heed their advice and visit the Sokolov-Miller Family Financial and Life Skills Center website immediately.