Improving Financial Literacy of College Students: A Cross-Sectional Analysis

Article excerpt

Financial literacy has become more important than ever as an increasing number of college students are relying on credit cards to finance their education. We examine whether college students are knowledgeable about finance, whether they improve upon that knowledge, and whether their demographic profile, financial backgrounds, and engagement/motivation level affect their financial knowledge and learning. Recruiting students who voluntarily participated in the pre- and post-tests of personal finance and managerial finance, and using multiple regression and the results of student course evaluations, we find that using finance courses positively affect the students' financial literacy. Moreover, we find that gender difference is found only in the pre-test of managerial finance, that female students significantly improved learning, and that students in the upper level of finance courses overall outperformed those in the lower level in both tests of personal finance and managerial finance. We also find that students' job experiences, financial background, attitude and behavior, and class participation and motivation determine the amount of their learning.

Keywords: Financial literacy, student learning, demographic profile, financial background, engagement/motivation


Financial literacy has become more important than ever as an increasing number of college students are relying on credit cards to finance their education. In contrast to the growth of credit card usage, students may have limited knowledge on the specifics of credit cards, i.e., the cash advance fee, the interest rate on their credit card, their credit card limit, and their current credit card balance (Jones, 2005; Joo, Grable, & Bagwell, 2001; Warwick & Mansfield, 2000). On the basis of a survey result in which participants correctly answered 53% of questions on personal finance, Chen and Volpe (1998) claim that college students are not knowledgeable about personal finance and they may not make sound financial decisions.

Lyons (2004) and Jones (2005) argue that college students overall seem to use credit cards responsibly and to manage their balances. However, there are financially at-risk college students who have excessive amounts of debt in today's consumer culture (Roberts & Jones, 2001). Recent statistics show that more than 50 percent of the students may carry four or more credit cards when they reach their senior year and the number of 18 to 24-year-olds declaring bankruptcy has increased 96% in 10 years (Young Americans: Center for Financial Education, 2009).

Hayhoe, Leach, and Turner (1999), Hayhoe et al. (2005), and Jones (2005) show that students with four or more credit cards are more likely to be older and female, to feel good with the use of credit cards, to apply for the cards at every opportunity, and are less likely to understand that interest is the cost of using credit. Studies identify demographic profile and characteristics of financially at-risk college students (Lyons, 2004; Lyons & Hunt, 2003). The at-risk students are more likely to be female, black, and/or Hispanic, older, to be financially independent, to receive need-based financial assistance, to hold $1,000 or more in other types of debt, and to have acquired their credit cards by mail, at a retail store, and/or at a campus table.

Student learning is highly associated with education quality, student engagement, motivational effects, self-beliefs, and achievement expectations (Clayson, Haley, & Smith, 2008; Cottrell & Jones, 2002; House, 2006; Kuh, 2005; Hamilton & Saunders, 2009). They find that the quality of the student experience has been improved through course assessments and changes in course designs, and through students being more deeply involved in their own learning, i.e., academic challenge, active and collaborative learning, student-faculty interaction, enriching educational experiences, and supportive campus environment. …


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