Academic journal article Financial Services Review

College Student Interest in Personal Finance Education

Academic journal article Financial Services Review

College Student Interest in Personal Finance Education

Article excerpt

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Financial education has long been thought to improve financial outcomes. Efforts to educate U.S. youth in primary and secondary schools resurged in the 1970s after falling out of favor (e.g., Bernheim, Garrett, and Maki, 2001). However, U.S. state-mandated personal finance education in grades K-12 is unevenly applied (Council for Economic Education, 2014), and its efficacy on financial outcomes is mixed (e.g., Hastings, Madrian, and Skimmyhorn, 2013).

College may be one of the last opportunities to help the young become more financially knowledgeable and confident. However, personal finance education is voluntary for many college students. The challenge is to increase student participation, but little is known about the drivers of student interest in personal finance education. For example, Lyons (2004) finds that financially at-risk students are relatively more interested in campus-provided money management information. More recently, Beierlein and Neverett (2013) examine the characteristics of students who take a personal finance course and find that gender, major, verbal SAT score, and high school GPA influence enrollments.

This study examines undergraduate college student demand for personal finance education using classic determinants of demand and gender to gain insights into increasing student participation in financial education. The sample is from a medium-size, private university that does not require personal finance as part of the curriculum. The campus has a small but emerging financial literacy program limited to Salt, a one-week speaker series each semester, and individual counseling from the financial aid office and the wellness center. Because of these limited opportunities for students, we characterize demand as stated interest in personal finance education.

Based on the theory of investment in financial literacy in Jappelli and Padula (2013), we model college student demand for personal finance education (the general body of knowledge) as a function of income, patience in consumption, time or effort cost as a price variable, initial stock of financial literacy, perceived return on financial literacy, and financial independence. Gender is added as an experimental variable. We also examine the demand for learning about specific topics within personal finance that are likely to benefit college students such as personal budgeting, credit cards, student loans, and an "other topics" category to capture interest in learning about retirement planning, leasing versus buying, and so forth.1

Prior studies indicate that numerical ability is associated with patience in consumption, the cost of acquiring financial literacy, and the initial stock of financial literacy (e.g., Agarwal and Mazumder, 2013; Bansak and Starr, 2010; Cole, Paulson, and Shastry, 2016; Jappelli and Padula, 2013). We explore the influence of math ability on demand for personal finance education by using a student's self-reported math ability, highest level of math course completed, and score on a five-question numeracy quiz based on Banks and Oldfield (2007).

We survey students and find that perceived return and time cost explain most of the variation in the demand for personal finance education while in college. These results are robust to alternative models and empirically support the theory in Jappelli and Padula (2013). However, student characteristics have varying influences on demand for specific topics within personal finance. For example, financial independence is positively and significantly related to all topics except credit cards. Students without student loans are relatively uninterested in learning about student loans. Self-reported math ability positively influences the demand for learning about personal budgeting and topics within the "other" category.

Gender has independent and robust explanatory power for interest in all personal finance topics except the "other" category. …

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