Academic journal article Journal of Financial Education

Experiential Learning in Personal Finance: A Principles and Applications Based Approach

Academic journal article Journal of Financial Education

Experiential Learning in Personal Finance: A Principles and Applications Based Approach

Article excerpt


Individual states have passed 24 bills, proclamations, and resolutions pertaining to increasing financial literacy at the state level. And Congress has established a Financial Literacy and Education Commission at the national level (Anthes, 2004). A growing collection of academic articles also recognizes the need to reform, or revolutionize, curriculum to teach students what financial literacy means, both experientially and cognitively (Anthes, 2004).

As evidence that the ivory tower of higher education understands the need for personal and family financial training, many colleges and universities offer some type of personal financial planning course (Gold, Pryor & Jagolinzer 2006). These courses take on a myriad of styles and pedagogical approaches to teach students how to manage their personal and family finances. In this article, we continue this discussion by motivating, presenting, and critically examining one such course which has been refined over a decade at a large, private university.

Financial Planning, a 400-level undergraduate course, is a principles- and applications-based approach to personal finance. It builds on the financial theory from core Finance classes and provides the opportunity to apply this knowledge to the development of each student's personal financial plan.

In this course, students learn that personal finance requires more than learning the language of finance and accounting, and more than just a change in spending habits - it requires a change in behavior. This class works to address that need to change behavior by using a principles-based approach for motivation and an applications-based approach for execution and follow-through.

We do not argue that we have constructed the optimal course, and realize there may be courses at other universities that are just as good, or better, at teaching personal finance concepts. The class we analyze herein contains several caveats. First, a core finance class is a pre-requisite to the class. For example, we assume the students have an understanding of the time value of money and basic financial instruments such as stocks and bonds before they take the class. Second, our typical student may be older than the national average and there most likely is a higher proportion of married students. Third, our philosophy is that the student's plan should be goal oriented, and that one of the primary goals is personal fulfillment which may not mean maximizing personal wealth. Flowever, following our intent of joining the research discussion, we propose five characteristics of this specific course which may set it apart from other courses on personal finance.

First, we take a potentially unique perspective on personal finance. The measure of success is not the lifetime earnings or wealth accumulation a person may achieve. With our paradigm, personal finance is not separate from our moral and ethical lives; rather, personal finance is simply part of them.

Second, we take a principles-based approach to personal finance. Unlike investment theory, investment vehicles, or financial assets, principles never change. A sound understanding of the correct principles of personal finance will act as a map to guide students as they work toward achieving their personal and family goals.

Third, we take an applications-based approach to learning personal finance. We learn best when we apply the things we learn in our daily lives (Serey and Verdever, 1988). It is not enough to know what to do-we must do it. Accordingly, we apply the things learned in this class in the hands-on creation of an individual Personal Financial Plan (PFP).

Fourth, we have partnered with Intuit's personal finance technology to help students reduce the time in performing personal finance. We have made the deluxe version of the most recent Quicken available as part of the class packet, and students learn Quicken as part of the class. The class packet includes 2 CDs: a class CD (which includes the e-book, previous semesters' PowerPoint presentations, supplemental readings, learning tools (e. …

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