What is the significance of August 14?
by James Larriviere, PhD, Professor of Business
We are into the month of August and I always look at August as a month of change. As a professor at Spring Hill College, I am eager to see the Spring Hill campus jump to life as students (or Badgers, as we call them) make their way back to “The Hill.”
Spring Hill will welcome first-year students to campus on August 19 and over the course of a few days, I will personally meet, on three separate occasions, with 35 new students interested in majoring in Business. Along with many other faculty and staff members, I look forward to being part of their successful transition into “College Life on The Hill.”
First-year students typically have a great deal on their minds and most would like a “college hack map” to help them navigate the “shark-infested waters” awaiting them over the first year and the remaining three years. The questions students pose typically go something like this: “What thing could I do now to make me successful at Spring Hill? What skills would be helpful to bring about a smooth and painless transition into college life? What can I do while at Spring Hill to ensure that I will get a job when I graduate? What is the best major for me?”
I typically will punt these questions to my student leaders who have been on The Hill at least one year and recently experienced the “first year obstacle course.” The typical responses from these upper-level students include “develop good time management skills” and “learn how to study.” They also emphasize the link between being really involved on campus and student success.
There is one thing that rarely makes the list — this one thing that is also important for success in college. Also, it is huge for the college graduate’s success in whatever career path he or she chooses. Do you think you know what this thing is? Let me give you a hint. Do not peak down to the next paragraph! OK, here we go …
This thing is nationally observed on August 14. This thing gained enormous amounts of attention in the wake of the financial crisis of 2007–09. This thing could be the most important thing you learn or you may not learn it at all. Finally, this thing will impact you either in a positive way or if you do not have or develop this thing, it will impact you in a very, very negative way.
HERE IT IS.
This thing is Financial Awareness. Not what you expected, right? National Financial Awareness Day is celebrated this year on August 14 and it is key to your success.
Yes, financial awareness can either make you or break you. Financial awareness provides you with knowledge and skills you need to manage money effectively. As a trained economist who teaches various courses in economics and finance, I see it quite fitting that we recognize a day to focus on financial health. Many students and their families are experiencing a month of transitions, both personally with young adults leaving to go back to school and financially with many parents dealing with large expenses hitting the family budget.
As a parent of a college student, I can speak from experience about this transition to college being both exciting and nerve-racking. First and foremost, the costs associated with sending a young adult to college are substantial. The big items like tuition, room, board and meal plan costs are typically known in advance. And, as most parents can attest to, the plethora of small expenses that pop up during the few weeks prior to classes starting really test the best budget plan! Then comes the unforeseen incidental expenses that pop up during the first semester, significantly impacting the bank account as well.
I firmly believe the best thing a first-year college student can take with them to campus, or learn on campus, is some degree of financial awareness and ultimately, financial literacy. Financial literacy is the understanding, through education, of various financial areas, like spending, financing and investing, to optimize one’s financial situation.
And where does this financial literacy come from? Research indicates children follow their parent’s lead when it comes to financial behavior. A research study analyzing the effects of parents’ values on children found a statistically significant positive association between parents’ saving rates and children’s savings rates. So the spending and savings behavior of young adults is correlated with the parent’s behavior. Wow, no pressure on you, Mom and Dad!
So, aside from obtaining financial literacy from family, where else can young adults develop financial awareness and literacy? High school and higher education are other options. Unfortunately, some schools, universities and colleges do little or nothing to prepare students to deal with their finances. Youth financial literacy statistics describe the poor financial knowledge foundations high school students possess. Other financial literacy statistics show a majority of individuals do not possess the financial expertise needed to make healthy financial choices that will benefit them in the long run.
So, enough with the depressing statistics about our national financial illiteracy. Here is an interesting statistic: In 2017, the National Financial Educators Council asked 1,101 young adults aged 18–24 years “What high school-level course would benefit your life the most?” The majority — 51.4 percent — responded “money management” as the course they thought would be more beneficial to their personal lives. These are individuals that are out of high school, looking back to identify the course they currently feel would help them the most, if the course existed in high school. It appears that post-high school-aged people feel a course in money management would help them the most as they navigate the college years.
Let me tell you how Spring Hill College is being proactive in enhancing our student’s personal financial literacy. Students at Spring Hill can choose to take courses in economics, accounting and financial management. These courses introduce tools to help the student deal with various personal finance situations. Another course that specifically addresses financial literacy is the Financial Planning course. This course is open to all students and takes the student through the whole personal financial plan. The six key components of the personal financial plan are:
1. Budgeting
2. Managing your cash (liquidity)
3. Financing your large purchases
4. Protecting your assets and income (insurance)
5. Investing your money
6. Planning your retirement and estate
What is most relevant for first-year students and college students in general are the first two components. Budgeting and managing cash flow are key to a student’s academic success and retention. Spending more than you have allocated for the month is a problem. If the student mismanages the money available to them, money will run out, financial hardship can result and unfortunately, it is possible the student will not return for the second year. The situation is similar for the college graduate who has not developed a strong sense of financial awareness. If they do not stay within budget and spend more than their income, there will be serious financial repercussions.
So, I hope August 14 and financial awareness has new significance to you. This is the day for you to take stock of your financial situation. If you are a parent that is financially literate, share your knowledge with your son or daughter and be sure to highlight those things you learned “the hard way.” If you are a student seeking to become financially literate, start by asking older students what courses had a positive impact in developing their financial awareness and literacy. Also, listen to podcasts that will educate you about financial literacy.
I will join 35 first-year students on August 19 and will share with them my annual message of starting down the path to financial literacy. The goal is to make the road to financial literacy the road we all travel, instead of the road for too few people.
