Financial Literacy for First Year Students

1. Financial Literacy for First Year Students An Intervention to Establish Positive Debt Management and Spending Behaviors Terri Fahnestock, Robin Hamilton, Alex Johnson, and David Lind

2. Overview • College students have many opportunities to acquire debt • Students must have the skills to handle this debt in a responsible manner • Intervention’s task is to help facilitate the understanding of: • Debt management • Terms of loans and credit cards • Current issues in financial management • Overall financial planning (budget spending, behaviors, etc.)

3. Setting The New University • Four-year liberal arts university • Student population range 15,000 to 20,000 • Intervention housed in the Financial Literacy Center within the College of Business • Finance professors and graduate assistants will facilitate the new program • Trained student volunteers will help administer this program

4. Literature Review • Choices that students make will influence their academic progress and their post-college financial situation (Cude et al., 2006). • Average debt from a four year institution $19,977 (Institute for College Access and Success, 2012). • Outstanding student loan balance about $870 billion, (credit cards $693 billion and auto loan $730 billion) (Federal Reserve Bank of New York, 2012). • Students may find that acquired debt will hurt chances of obtaining a lease or home loan, or potential employment (Goetz et al., 2011).

5. Lit Review – Budgeting Practices • Predicted by personality (impulsivity), financial status, and cognitive factors (financial knowledge). • Tendency to engage in financial management is determined by: • Attitudes towards money management • Past behaviors • Perceived ability to control behavior • Amount of debt related to student’s sense of well-being/stress. • Students rely on others to tell them the terms and agreements without verifying accuracy of information (Chan et al., 2012)

6. Lit Review – Interventions • Goetz et al. (2011) did study of 509 undergraduate students that found students were interested in interventions • Intervention included: workshops related to financial literacy, counseling centers, and online financial management resources • Interventions should show students are equipped to make decisions about debt and are committed to the repayment of creditors after graduation (Chan et al., 2012). • Financial education programs should include: • The learning of good financial practices, terms and conditions of loans and credit cards, and basic concepts and precautions (Chan et al., 2012)

7. Financial Literacy Individuals who are financially literate are: • Knowledgeable, educated, and informed on the issues of managing money and assets, banking, investments, credit, insurance, and taxes. • Understand the basic concepts underlying the management of money and assets. • Use that knowledge and understanding to plan and implement financial decisions (Cude et al., 2006, p. 103).

8. Theoretical Analysis • Chickering’s Identity Development Theory • Support on how students perceive themselves and their environment • Kolb’s Theory of Experiential Learning • How various types of learning styles help students development

9. Chickering’s Identity Development Theory Three Vector Focus: • Developing competences • Intellectual competence (loans, credit, money management) • Interpersonal competence (interacting with faculty, staff, and peers) • Managing emotions • Linking between stress and decision making • Lack of knowledge (terminology) • Moving through autonomy towards interdependence • Interdependence: mutually reliant on each other • Students draw connections between themselves and external forces: peers, faculty, staff • Student no longer feel alone

10. Kolb’s Theory of Experiential Learning • Incorporates an individual student’s methodologies to identifying and processing information (Di Muro & Terry, 2007). Figure 1.1. Chart and description based on Kolb's experiential learning model. Adapted from Bergsteiner, Avery, & Neumann (2010).

11. Development Context • Kolb • Discipline cultures and socio-cultural variations effect students learning • Group norms created and one style preferred over another (Evans et al., 2010) • Attitudes, student backgrounds, faculty makeup • Encourage development from faculty to cultivate new learning skills • Contribute to overall success – alleviate pressures after graduation • Chickering • Environmental Influences • University’s goals and objectives • Student-faculty relationships • Student development programs and services

12. Target Audience • Traditional freshmen who are recent high school graduates • Ages 17-19 with diverse racial, cultural, and ethnic backgrounds • No prior knowledge in financial literacy required

13. Developmental Relevance • Chickering • Developing Competence • Intellectual Competence: “…skills and knowledge gained about a particular subject” (Evan et al., 2010). • Interpersonal Competence: “…ways students utilize their skills to collaborate with peers and mentors” (Alessandria & Nelson, 2005). • Managing Emotions • The link between stress and decision making when students are required to read and sign terms and agreements in a limited amount of time. • Students’ awareness (or the lack thereof) of cost of tuition, fees, books, supplies, room and board, etc. • Moving Through Autonomy Toward Interdependence • “students also develop instrumental independence that includes self-direction, problem-solving ability, and mobility” (Evans et al., 2010, p. 68) • Mutually reliant on others (e.g. family, peers, etc.), and draw connections between themselves and external forces: peers, faculty, staff • Kolb • Will offer different techniques and methods to reach all audiences and learning styles • “to provide varied methods of instruction and evaluation, to offer both support to aid students in connecting” (Evans et al., 2010, p. 143) financial knowledge obtained to the decision-making process.

14. Staff and Volunteer Training • Finance department professors, graduate assistants, and student volunteers • External financial professionals and stakeholders (e.g. financial advisors, bankers, financial aid representatives • Utilize finance professionals within the college • NASFAA’s live webinars, online courses, and on-site training • Federal Student Aid online training tools • NACCC training for basic knowledge on credit cards, loans, debt management

15. Intervention & Intervention Goals • The intervention’s goals are to equip first-year students with the basic knowledge and skills on how to be financial literate and practice good financial decision making • According to Chickering, first-year students enter college at different developmental stages. • They may not have developed competence, understand how to manage their emotions, or have a sense of interdependence, specifically in regards to financial literacy • Administering Kolb’s Experiential Learning theory will help individuals educating students have the: “ability to provide appropriate challenge and support in the various environments in which student learning and development can occur” (Evans et al., 2010, p. 137)

16. Coaching and Advising • Housed in the Financial Literacy Center (FLC) • Staffed by finance professors, graduate assistants, and trained student volunteers • S.M.A.R.T. Guide • Creating and developing specific, manageable, attainable, and reliable techniques • Assist students • Creating budgets • Interpret terms of agreements • Check writing • Balance financial ledger • Assess spending habits

17. Five Days of Finance • Week dedicated to creating awareness, providing resources, and facilitating discussions for students

18. Panels/Seminars • Provide rich discussion on financial issues that face first-year students • Topics may include: money management, managing debt, preparing for the future, and making sound financial decisions. • Guest speakers will discuss and debate topics of financial literacy and financial management

19. Money Management Course • Optional one hour course: Money Management Basics • Focus: financial planning, spending, investing, and retiring • Outcomes: • Creating financial goals and managing personal finance • Creating spending plan to meet financial goals • Recognize wise debt management • Understanding of various types of checking and saving • Understanding of various investment accounts • Knowledge and use of helpful tools • Recognizing ways to improve credit scores and tactics to prevent identity theft

20. Rationale • Supported by Chickering and Kolb • Based on level of development of first-year students • Most effective learning styles to reach students • Intervention goals will provide: • Financial literacy and knowledge to students • Decrease impulsive spending habits and acquiring debt • Intervention framework meets the needs regardless of • Development • Learning style • Prior financial behaviors

21. Evaluation Plan • FLC will build in methods to have continuous assessment and evaluation of the program and the services it is providing students • Survey assessing the student’s level of financial literacy knowledge • After completing optional class or counseling session, an evaluation given surveying instructor or counselor • Monitoring number of downloads of the mobile finance application

22. Conclusion • Clear need for financial literacy among first-year college students. • Student loan debt is a daunting concern • Creating useful campus resources and educational activities encourage students to learn new skills. Goal: provide students resources through the framework of Chickering’s Identity Development Theory and Kolb’s Theory of Experiential Learning.

23. References Alessandria, K. P., & Nelson, E. S. (2005). Identity development and self-esteem of first-generation American college students: An exploratory study. Journal of College Student Development, 46(1), 3-12. doi: 10.1353/csd.2005.0001. Bergsteiner, H., Avery, G., & Neumann, R. (2010). Kolb’s experiential learning model: Critique from a modeling perspective. Studies In Continuing Education, 32(1), 29-46. Chan, S., Chau, A., & Chan, K. (2012). Financial Knowledge and aptitudes: Impacts on college students’ financial well-being. College Student Journal, 46(1), 114-132 Chickering, A. (n.d.). Seven vectors: An overview. Cabrini College. Retrieved from http://www.cabrini.edu/communications/ProfDev/cardevChickering.html. Cude, B. J., Lawrence, F. C., Lyons, A. C., Metzger, K., LeJeune, E., Marks, L., & Machtmes, K. (2006). College students and financial literacy: What they know and what we need to learn. Eastern Family Economics and Resource Management Association, 102-109. Di Muro, P., & Terry, M. (2007). A matter of style: Applying Kolb’s learning style model to college mathematics teaching practices. Journal of College Reading and Learning. 38(1). 53-60. Evans, N. J.,Forney, D. S., Guido, F. M., Patton, L. D., & Renn, K. A. (2010). Student development in college. San Francisco: Jossey-Bass Federal Reserve Bank of New York. (2012). Grading Student Loans. Retrieved Wednesday, October 24 from http://libertystreeteconomics.newyorkfed.org/2012/03/grading-student-loans.html. Federal Student Aid. (2012). Retrieved from http://www2.ed.gov/offices/OSFA/training/newfaps.html. Goetz, J., Cude, B. J., Nielsen, R. B, Chatterjee, S., & Mimura, Y. (2011). College-based personal finance education: Student interest in three delivery methods. Journal of Financial Counseling and Planning.22(1), 27-42. Healey, M., & Jenkins, A. (2000). Kolb's experiential learning theory and its application in geography in higher education. Journal of Geography. 99(5). 185-195. Institute for College Access and Success. (2012). State by State Data. Retrieved Monday, October 29 from http://projectonstudentdebt.org/state_by_state-data.php. Martin, A. & Lehren, A. W. (2012, May 12). A Generation Hobbled by the Soaring Cost of College. New York Times, http://www.nytimes.com/2012/05/13/business/student-loans-weighing-down-a-generation-with-heavy-debt.html?r=1. National Association of Certified Credit Counselors. (2012). Retrieved from http://naccc.us/documents/Intro%20Naccc%200307DS.pdf. National Association of Student Financial Aid Administrators. (2012). Retrieved from http://www.nasfaa.org/Default.aspx. Terry, M. 2001. Translating learning style theory into university teaching practices: an article based on Kolb’s experiential learning model. Journal of College Reading and Learning. 32(1). 68-85. Texas Tech University. (2012). Retrieved from http://www.orgs.ttu.edu/r2b/.