This article is part of WTOP’s monthlong series, “Money Matters,” where we explore tips for saving, budgeting and making your money work for you. Check for new articles all month, right here on WTOP.com.
In recent years, one of the more popular business school classes at the University of Maryland has been on financial literacy. Accounting professor Michael McMillan said he had to split the class into two — one for underclassmen and one for students getting ready to graduate. He’s also tripled the size of each class, which both have long wait lists every year.
It’s an indication to him that too many college kids show up to campus not knowing the things they need to know about money.
“Students want to learn,” McMillan said. “They want to be able to manage their retirement, save money. Perhaps they have seen their parents having financial difficulty or financial issues, and they don’t want to fall into that same trap.”
But he said even smart kids learning about finance and more advanced monetary policies can struggle with the fundamentals. Some don’t even know how to budget for themselves. When he asks students who admit they don’t make a budget for themselves why that’s the case, he said the answer is often that their parents help cover their expenses for them.
“That’s the problem, and I understand parents are trying to help their children financially and everything else,” McMillan said. “But not talking about money with them, not being able to say, ‘No, we cannot afford this, or you need to learn how to manage your money,’ you’re crippling them.”
For freshmen and sophomores in college, the hard part can be managing expenses, since their income likely isn’t much. But their friends might have more money, and it can be hard to resist the pressure to join them for a night out.
“They often will conform to the behavior of their peers, even if they might not have the same financial standing as some of their peers,” McMillan said.
“Parents need to talk to kids about money,” McMillan added. “Parents never talk to their kids about money. Parents also need to restrict their kids spending and … put them on an allowance and say ‘This is how much money we are giving you this month, and you need to figure out how to spend that money to take care of all of your needs,’ and realize that they’re not being mean to their kids by being strict with them. They’re doing their kids, as well as themselves, a favor.”
McMillan is also the co-director of the school’s Financial Wellness Center, which is open to students all across the campus, offering financial guidance and assistance to students on establishing a 401(k) or other type of retirement account once they leave school. Other lessons focus on planning for student loan repayments and even how to read a lease when searching for a place to live.
“You’re gonna have to learn some of these lessons anyway,” McMillan said. “But at least we’re trying to alleviate some of the severity of these lessons.”
