What Should I Teach College Students About Money?
College me: “Someone please tell me about compounding interest!”
If you had two hours to teach a group of college students about personal finance, what would you tell them?
I’m asking because I’ve been entrusted with this awesome task. I was invited to speak to a local group of college women and teach a “budgeting workshop.” I spoke at a similar event about two years ago, and I’ve got my old materials, but there’s so much I want to add on both philosophical and practical levels.
I want to include a smattering of a theology of money (they are Christians), big-picture stuff about debt, saving, and investing, and something like the Ramsey baby steps. I want to give them tools to create a working budget. I want to give them a book list. I want to convince them that materialism is stupid. I want to blow their minds with the power of compounding interest. I want to make them change their majors to something useful. I want them to dump their loser boyfriends who are terrible with money (where applicable). I want them to stop taking out outrageous student loans. I want them to start giving away money before they even have much of it, so that it’s a habit and a value when they do have it. I want them to know that contentment can take you further than the best budget.
Clearly my goals are a little ambitious and perhaps too personal for a two-hour group workshop. So I’m asking our wise & wonderful readers: what would you tell these young women? What do you wish someone would’ve told you?
I wish I would’ve understood the power of compounding interest earlier in life. I know we learned about it in math class and probably even a “money management” course. But I wish someone would’ve taken me by the shoulders, given me a good shake, and told me that you can rip dryer sheets in half all you want, but you aren’t going to build wealth without the magical combination of time and interest. I’m think about starting off the night with the old, “Would you rather have $1 million now, or a penny doubling every day for a month?” routine, followed by CHARTS & GRAPHS!
Help me set these ladies on the right track. What’s your best advice for them?
Covering the basics like the Ramsey baby steps is a good start. Wants versus needs, spending less than you make, emergency funds, are good topics. I believe with a young audience that speaking about retirement often doesn’t go over well because its so far away. I like financial independence as a topic better. Good luck!
I know I wasn’t remotely interested in retirement at their age! Wish I would’ve heard of FI sooner, though.
I think it’s important to show them what life is like when you’re smart with money. They can already see what life can be like if they’re not smart with money, they can enjoy life’s pleasures now at the cost of some nebulous idea of the future.
I find that showing them that early retirement is possible and traveling the world is possible, it really can be motivating to someone who doesn’t understand why it matters whether they spend $15 a day on lunch out with co-workers.
You can show them that after college they’re not necessarily staring at 40 years of working and that’s a powerful message that frames the rest of the teaching.
It’s great you’re doing this!
The long-term impact of seemingly small decisions is a great point to make.
If I had this opportunity, I would start with the index card exercise. Write everything you need to know about money on an index card.
This will keep you focused on the majors and not on silly tangents.
Mine might say:
God cares about how you use $
Contentment & generosity come from your heart, not your bank account.
Budget to create margin
Save to create flexibility
Invest to create opportunites
Don’t place your faith in uncertainties of wealth.
For me, 15 minutes for each of these 6 points would be doable. You might have to break it down to 3-4 points if you’re a big talker.
Those are some great points; I’ll see if I can get my ideas so concise.
You probably won’t be able to use this during your two hour session, but it would be a good recommendation for extended reading. It’s cheap, it’s short, and it is wonderful.
If You Can: How Millennials Can Get Rich Slowly By William J Bernstein
http://www.amazon.com/If-You-Can-Millennials-Slowly-ebook/dp/B00JCC5JKI
Thanks for the recommendation.
There’s a lot of anxiety over student loans. Students need to go to school but they feel bad about the amount of loans this can require. Maybe some balance in this; understanding that pretending to be poor should start immediately because loans are for tuition and not living expenses. Also, a quarter billion dollars in research funded by the Lilly foundation basically showed that the students who do better were focused on their purpose, calling, and meaning instead of just the academic credential and money. “Meaning trumps money” for success in college and life. This fits well with the theology you describe.
I agree student loans need to be discussed. Thanks for sharing that research.
I think you do need to pound the compound interest thing in. Give them the example of someone who invests the max from 20 – 30 vs the person who invests from 30 to retirement. It’s the most startling example.
And maybe tell them what I’ve been hearing lately: negotiate your salary. Apparently, not many people have been asking for more than the offered pay, but a large number who did, have gotten it.
But yeah, tell them to think carefully about grad school and the loans it’ll incur. Or that maybe they can find a job and go to grad school part-time — or maybe even find an employer than will help subsidize the degree.
I think the investing at 20 vs. 30 example is probably way more poignant than the mythical penny doubling each day illustration.
Good point about negotiating and avoiding excessive school debt.
This is tough because when it’s college students I always want to default to discussing career-related topics, as I think getting a good job and/or doing things like networking has such a huge impact on your finances when you are college-age. I realize that isn’t the focus so I would really stress tracking your income and expenses. I wish I had started this during college and I think it’s an essential “first step” to getting your finances on the right track.
Tracking income and expenses is so important, otherwise it just feels amorphous to figure out your finances.
Since you are speaking to women and women are statistically bad at negotiating salaries and benefits, I would definitely include that. You can’t get what you don’t ask for! You are already planning on the magic of compound interest, hammer that home. I would also bring up financial planning for having a family. Whether they plan to stay home with kids or work and pay for childcare, it is best to be thinking ahead about that at the beginning of a career rather than in the third trimester.
It is so important to think about childcare plans way ahead of time–especially when buying a home!
Oh wow, this is an amazing opportunity. I so wish that I had cared about personal finance in college. In case it’s helpful, here are a few things that would have helped me:
1. Understanding the power of tracking your spending. It was only as a 30-something adult, earlier this year, that I finally committed to entering all my receipts in a spreadsheet for a month and grouping the amounts into “food”, “rent”, “clothing”, etc. Until this point I had had absolutely no idea how much it cost me to live from month to month, and it was really eye-opening. I would challenge them to do it for a month and see what they find out. I truly, truly thought that I spent about $100/month on food before I did this, only to find out that it was closer to $450. Even college students on a meal plan have expenses, and becoming more aware is always a good thing.
2. Understanding that it’s cool (!) to be money savvy, and that being responsible about money does not mean that you’re a selfish, Scrooge-y type person. There are lots of awesome people out there with inspiring blogs that they might be interested in finding out about. Also I’m pretty sure there are celebrities who choose to live simply and save/invest most of their money (I’m pretty sure Jay Leno is one of them; maybe there are more.)
3. Understanding that while it’s tempting to take out loans for “living expenses”, this is a very shady category of expenses. It’s very easy to take out tons of loans for “living expenses” that you don’t really need. Education is valuable, and you may need to make sacrifices to get it, like getting a part-time job or not going out to eat in restaurants.
So those are my suggestions (in addition to the concepts that you mention, like compound interest). Good luck — that’s so cool that you get to do this! 🙂
Wow, what a powerful example of the power of tracking expenses!
Good point too about even wealthy people living below their means. We all know deep down that a lavish lifestyle is not what brings happiness–and can even work against it.
Awesome! I’ve gotten to speak to a few different college groups and classes. I always love giving them some knowledge about money. It’s fun and rewarding!
I’m so excited to have this opportunity. It’s definitely the time in life to be talking seriously about this stuff.
I would def start with a joke (this was a joke)
What an incredibly difficult question! I hadn’t thought about it in a while until I did the index card and was reminded how difficult it is to not only identify the info but figure out HOW to give it in a way that sticks.
What’s tricky is to get them excited it’s best to go with the “out money aside and then it compounds and then your filthy rich.” BUT in reality building wealth requires much more than cimoiund interest. And even worse, the truth is boring!
Best of luck. I know you’ll do great and keep us posted!
Thanks, Luke. You’re right–the truth is boring sometimes. I want to highlight the not boring part of being able to take awesome opportunities as an alternative to debt.
I think the student loan piece is huge for college students. Explaining how compound interest works is definitely important. I think it would be useful to help them estimate how much their student loan payments will be after they graduate. I did a terrible job of this – I estimated that my payments would be about $500/month, but they were actually closer to $1,000/month. If I’d realized how high they would be, I wouldn’t have gone to grad school and I wouldn’t have used student loans to pay for apartment rent.
Yes, that is huge! Thanks for sharing your example, it really drives home the point.
Kalie- Do you have a link for the charts about investing at 20 vs 30? I would like to show my young adult children that info. I can see (now) how that approach would interest them more than talking about a well-padded retirement. I am enjoying your blog. Wish I had known what you know. Things would be very different. Thank-you!
Here is a link to Dave Ramsey’s example of different investment scenarios (scroll down a bit to see the chart): http://www.daveramsey.com/blog/how-teens-can-become-millionaires/. More on investing soon!