Personal finance should be G.E. class

Though regarded as one of the top institutions of higher education in the nation, USC fails to educate its students in a subject essential to life as an adult: money.

While a student can’t earn a bachelor’s degree from our fair university without taking courses in writing, global cultures and scientific inquiry, the essential subject of personal finance is totally absent from the curriculum. With all due respect to the academy, understanding how to manage money will be far more important to most upon graduation than understanding the sexual rituals of vanishing tribes in Papua New Guinea.

finance classOn its website, the College of Letters, Arts & Sciences states: “The university’s general education program is structured to provide a coherent, integrated introduction to the breadth of knowledge you will need to consider yourself (and to be considered by other people) a generally well-educated person.” I find it hard to believe that in a capitalist economy a person can be considered “well-educated” if he or she is ignorant about money.

As Renaissance philosopher Sir Francis Bacon said five centuries ago, “If money be not thy servant, it will be thy master.” And indeed, most people in this country work for money instead of making their money work for them.

In February, the U.S. Department of Commerce reported the personal savings rate for 2006 as negative 1 percent, the lowest level since the Great Depression. Americans are in the habit of spending more than they earn, living on credit and becoming enslaved to their own debt – a habit that many form in college.

Repeated studies show college students often take a cavalier approach to accumulating debt while in school. According to Nellie Mae, the nation’s largest provider of student loans, the average college undergraduate holds around $3,000 of credit-card debt in addition to student loans and other forms of borrowing. Many students accumulate this debt on credit cards for which they signed up after being solicited on campus by lenders invited by USC. The thinking goes as advertised: “I can borrow a little money now, and then I’ll pay it back when I have a good job after I graduate.” Unfortunately, a little money now can turn into a lot of debt later when compound interest takes effect.

With a basic education in personal finance, students could use the principle of compound interest to their benefit instead, and begin building a portfolio of investments that in time could be worth a significant sum. Rather than being forced to make nagging debt repayments at the outset of their careers, graduates could enjoy dividends and growth from their investments as a supplement to their incomes.

Some may argue that a school nicknamed the “University of Spoiled Children” wouldn’t need to educate its students about money because they already have it; however, the problem with many spoiled children is that they’ve never known how to make it. With expenses reliably placed on parents’ credit cards and the word “budget” absent from their vocabularies, students used to relying on an expense account while in school may face a rude awakening when they become independent.

A single general education course in personal finance would help students avoid the bad habits that continue to befall them in spite of the numerous articles and educational programs provided by other organizations. They would be empowered to study subjects and take jobs based on intellectual interest rather than a concern for compensation. And the university endowment would benefit from having more wealthy graduates.

Carlo Romero is a public policy master’s candidate from San Diego. His column, “The Tonic,” runs Wednesdays.