Developing Financial Literacy and Life Skills in Prospective College Students

Nina Lyon-Bennett, Ph.D., CFCS-HDFSDepartment of Human Ecology

University of Maryland Eastern ShorePrincess Anne, MD 21853

Understanding Financial Literacy• Understanding financial literacy-and how it

impacts student retention and persistence on our campuses-is an important concept for us to comprehend.• Most students don't come to college

understanding financial aid, loans, debt, rising costs, and managing a budget

Purpose• The purpose of this proposed project is to help prospective

college bound students:• Increase financial literacy• Develop basic skills in money management• Help young adults achieve self sufficiency through character

building, decision-making, and development of life skills. • To develop a service-learning educational project for high

school students enrolled in the Upward Bound Program at UMES.

• Provide FCS undergraduate students with leadership, mentoring & service learning opportunities.

Upward Bound• A pre-college program funded by the U. S. Department of

Education. • Designed to motivate eligible high school students to enter and

successfully complete post-secondary education.• Serves 100 high school students from schools in Somerset and

Wicomico counties• Provides the opportunity for students to strengthen academic

skills in:• Math & Science• foreign language• English• Study skills & P/SAT • building self-confidence and social skills

Upward Bound• 1/3 of students enrolled in Upward Bound come from families

where neither parent is a graduate of a four-year college• 2/3 of students enrolled are low-income and first-generation

students • 1st-Generation College Bound Students• come from families without a college-going tradition• Some have parents who support their plans for higher education;

others are under family pressure to enter the workforce right after high school.

• students who may not know what their options are regarding higher education, and they may have fears about going to college and misconceptions about college and its costs

Financial Literacy• This project attempts to

address an important gap in knowledge and behavior.

• Provide sound money management tools.

• Help student better understand the link between financial matters, consumerism, and their ability to make wise decisions.

• Financial principles can have an impact on students’ financial future.

• According to Hira (2002), “Family financial failures have both personal and societal costs.”

• This project has the potential to provide students with life skills and “soft skills” that are often lacking in today’s workforce.

Financial Literacy• The American Association of Family and

Consumer Sciences stresses the importance of financial literacy to young people.• The average student who graduates from

high school lacks basic skills in the management of personal financial affairs

•What does this mean for the average college student?

Undergraduate Credit Card Debt

• 21 percent owe $3,000-$7,000 on their personal credit cards.• 75 percent of credit card holders have one card

maxed out.• 64 percent do not know what the interest rate is

on their credit cards.• Bankruptcies for those under age 25 years have

increased from 15,000 cases in 1995 to 150,000 cases in 2000

Undergraduate Credit Card Debt• In 2009, two-thirds of college students borrowed to pay for

college, carrying an average debt load of $23,186 by the time of graduation (Chaker, 2009).

• According to Sallie Mae's National Study of Usage Rates and Trends (2009), 84% of undergraduates have a credit card, and the average number of cards carried per cardholder is 4.6.

• The average undergraduate carries over $3000 in credit card debt

• Financial experts estimate that nearly half of all students who graduate from college have an "unmanageable debt burden" with repayments exceeding 8% of their monthly income (Zaff, 2004).

Why Are Students Leaving College?The number one reason is financial reasons

A study conducted through a partnership between USA Funds and Noel-Levitz about how gaining financial literacy skills figures into a student's perception of value in their college experience found:• students quickly realize they need to learn about

financial literacy, • that it is a priority for them, and • that they expect their institution to fill that need.

Support for Financial Literacy

• The importance of youth financial literacy and effective programs are critical as the buying power of young people continues to increase (Holdsworth, 2005).

• Spending and saving habits form early and the best way to tackle personal financial problems seems to be with education, beginning as soon as kindergarten and lasting through 12th grade (Brietbard, 2003).

• Teaching children about money is an invaluable lesson that can and should start early; and, with an understanding of the value of money, children can begin to learn how to use it wisely (Godfrey, 2009).

Importance of Financial Literacy

• Individuals who learn financial management at a younger age tend to do better financially than those who do not have financial education (Stanger, 1997)• As little as ten (10) hours of instruction in money/finance

management positively impacts students spending and saving habits (Children’s Financial Network, Inc., 2009)• When we teach children to save, we are encouraging

young people and their families to learn more about a subject that is central to how they will live the rest of their lives (Connelly, 2009)

“Our best chance of improving the money management skills of today’s youth is through financial education in school, after school, and at home.”

Laura Levine, Executive Director of Jump$tart Coalition

“Personal financial literacy is essential to ensure that individuals are prepared to manage money, credit, and debt, and become responsible workers, heads of households, investors, entrepreneurs, business leaders, and citizens.”

Democratic Congressman Ruben Hinojosa

Objectives• To help Upward Bound students (& their parents/guardians)

and UMES freshman in the Department of Human Ecology to:• Develop an understanding of personal financial literacy• expand their knowledge and education on the issues of managing

money• help them better understand the basic concepts underlying the

management of money• enhance their financial literacy and understanding about the

impact of financial decisions on other areas of their lives• assist with decision-making skills and understanding the

importance of making sound decisions• help students develop or enhance their “soft skills.”

Implementation• To accomplish the above objectives, college students enrolled in

the Department of Human Ecology, will participate in training on financial literacy and serve as mentors to high school students.

• Criteria:• At least a junior majoring in Human Ecology (preference in FCS)• At least a 2.75 GPA • Strong work ethics, excellent communication & interpersonal skills• Provide at least one letter of recommendation • Demonstrate leadership skills, as evidence by involvement in clubs,

organizations, etc.• Willingness to commit to at least two Saturdays/month for

mentoring activities• Willingness to commit to 4 training sessions

Program Outline & Assessment• Upward Bound students will:• be given a pre & post-test to assess their level of financial literacy• receive 6-8 weeks of financial literacy and life skills training. • Complete evaluations on the effectiveness of program

• Student mentors will:• complete a service-learning project by documenting their

experience of developing a project of this nature, through pictures, reflections, and journaling.

• Parents will:• Participate in program• Complete evaluations on the effectiveness of program

Expected Outcomes• Support student’s hands-learning experience and the sense of

volunteerism through community engagement and service learning.

• Increase and/or enhance students’ understanding of the importance of financial literacy, money management and life skills training.

• Enhance the educational experience of students in the Department of Human Ecology by supporting the mission of finding solutions to critical problems facing individuals, families, and communities.

• Provide students with an opportunity to give back to the local community by identifying the need and finding solutions to meet that need

Expected Outcomes• Provide Human Ecology undergraduate students with an

opportunity to meet the requirement of non-traditional study.• Students will:

• gain college credit for this experience (HUEC 499 – Independent study)

• gain experience in research and/or service learning.

• Provide students with an opportunity to present an end of semester presentation• Members of the community and the Upward Bound program will

be invited to learn about the impact of this project• Increase the visibility of the Department of Human Ecology• Expose Upward Bound Students to possible academic and

career opportunities

Funding

• To implement this project, UMES & Department of Human Ecology received a $10,000 Community Grant from Bank of America• Funding for this project will:• Provide Human Ecology students mentors with

financial stipends to support their education• Provided an outstanding Upward Bound

student with a book scholarship of at least $500

Why Should Colleges Care?Consider the Cost of Attrition

* Enter your full time credit count and multiply by your per credit rate. Example: 12 credits x $200 = $2,400 in tuition each semester* Now enter your new freshman student enrollment: Example: 1,000 new students full time in 1 semester brings in $2.4 million gross revenue ($4.8 million a year)* Now enter your attrition rate after one year and the actual number who left for financial reasons: Example: 80% = loss of 200 students; 100 left for financial reasons.* Result: 100 students leave for financial reasons x $2,400 loss per semester x 6 semesters.* Over the next three years, your institution has a gross loss of $1,440,000

Partners

•University of Maryland Eastern Shore Upward Bound Program•University of Maryland Eastern Shore

Department of Human Ecology•Bank of America

References• Adams, Ruth L.. "Financial Literacy and Retention." College and University.

American Association of Collegiate Registrars and Admissions Officers. 2006. Retrieved March 14, 2013 from HighBeam Research: http://www.highbeam.com/doc/1P3-1070795951.html

• American Association of Family & Consumer Science• http://aafcs.org/Advocacy/financial_literacy.asp

• College Board (2009). Trends in College Pricing. Retrieved March 14, 2013, from http://www.trends-collegeboard.com/college_pricing/pdf/ 2009_Trends_College_Pricing.pdf

• Hira, T. 2001• Jump$tart Coalition for Personal Financial Literacy (www.jumpstart.org)• Robb, Cliff A.; Mary Pinto,. "College students and credit card use: an analysis

of financially at-risk students.(Report)." College Student Journal. Project Innovation. 2010. Retrieved March 14, 2013 from HighBeam Research: http://www.highbeam.com/doc/1G1-248733618.html

• USA Funds Web site: <www.usafunds.org

Contact InformationDr. Nina Lyon Bennett, Chair

Department of Human EcologyUniversity of Maryland Eastern Shore

Princess Anne, MD 21853nlbennett@umes.edu

(410)651-6056

Dr. Jada BrooksAssistant Professor

Department of Human EcologyUniversity of Maryland Eastern Shore

Princess Anne, MD 21853jebrooks@umes.edu

(410)651-6063