Financial Literacy of Freshmen Business School Students

Abstract

In recent years, financial literacy has increasingly captured attention of banking and financial industries, policy makers, government agencies, public interest groups, and members of news media. These interested parties are concerned that consumers lack basic skills required to make decisions beneficial to their economic welfare. Financial illiteracy can hinder one's ability to achieve long-term goals such as succeeding at higher education, owning a home, and financing retirement. This study investigates efficacy of having upper-level accounting majors teaching basic financial literacy concepts to freshmen business majors. Specifically, upper-level accounting majors at a small mid-western university developed and conducted financial literacy training workshops for freshmen business majors during 2007/2008 fall and spring semesters. Both quantitative and qualitative results that flowed from training workshops are reported. Several positive outcomes accompanied project. First, delivery of this training provides a foundation of financial literacy that will hopefully enhance their ability to make financial decisions into future. Second, upper-level accounting major mentors enhanced their leadership, project management, teamwork, and public speaking skills while concurrently also expanding their own financial literacy. Each of these skills enumerated constitute vital components in professional portfolio for individuals seeking a successful career in business as well as personal financial stability. ********** Financial literacy has grown in importance to practitioners, researchers, and policy makers in recent years. As a result of on-going changes in financial services industry, personal finance has become progressively more complex and penalties associated with inadequate financial knowledge exceedingly harsh (e.g. subprime mortgage and high fore closure rate). It is abundantly clear that many citizens, not just disadvantaged, are not obtaining sufficient education and understanding of basics of financial literacy that are needed to make them productive and successful members of society. And, of major importance to educators, this group appears to include a significant population of college graduates including accounting and business majors. This study describes results of a financial literacy training workshop conducted by upper-level accounting majors at a small mid-western university. Freshman level business school students were subjects. Specifically, financial literacy training took place utilizing a structured format of two workshops delivered on consecutive Monday afternoons. Both training sessions were mandatory for all students enrolled in introduction to business course. The trainings primary focus was on educating young college students on principal concepts and accompanying importance of proper debt and financial management. Additionally, upper-level accounting student trainers also gained valuable experience using skills such as leadership, project management, teamwork, public speaking, and community service while concurrently enhancing their own financial literacy. A pre/post test format was used to assess learning experience and effectiveness of training sessions for subjects. Further, a brief questionnaire was deployed to solicit student feedback on their experience. In conjunction, these two assessment methods serve to provide a foundation for evaluating and improving training materials for subsequent delivery. Literature Review Financial literacy is defined as the ability to make informed judgments and to take effective actions regarding current and future use and management of money (The U.S. U.S. Department of Treasury, 2008). It encompasses the ability to understand financial choices, plan for future, spend wisely and manage and be ready for life events such as job loss or saving for retirement (Basu, 2005). …