Why personal finance belongs in every major

Money management education is a crucial step towards achieving financial stability and success. It involves acquiring the necessary knowledge and skills to effectively handle and allocate your financial resources. By mastering the art of budgeting and financial planning, individuals can take control of their finances and make informed decisions that align with their long-term goals. 

One can delve into a variety of personal finance subjects that encompass crafting well-structured budgets, diligent saving and strategic investing, effectively managing credit and debt, and planning for a secure retirement. 

Having a solid grasp of money management is crucial for individuals seeking to attain financial stability and accomplish their desired financial objectives. In a nation characterised by a burgeoning youth population, cultivating financial literacy from an early age can yield substantial benefits for both personal financial stability and the overall economic trajectory of the country. By fostering a financially responsible and stable citizenry, this education is a catalyst for a prosperous future. 

Many educational institutions, reputable organisations and esteemed financial institutions provide a number of comprehensive money management education programs and valuable resources. This can include courses such as "Personal Finance and Investing" as offered by Harvard University, "Fundamentals of Personal Finance" as offered by the University of California or even "Personal Finance for Non-Business Majors" as offered by the University of Texas.
Current state of financial literacy and education in Bangladesh
According to the Financial Inclusion Insights (2018) Program by Intermedia Research, Bangladesh has a financial literacy rate of 28%. This statistic underscores the considerable challenge in improving the country's financial literacy. With less than one-third of the population having a basic understanding of financial concepts, there is a pressing need for focused efforts to enhance financial education. 

Bangladesh's demographic landscape has a substantial proportion of its citizens who are actively enrolled in various universities across the country. As per the UGC Annual Report 2020, on average, 4,69,0876 students are enrolled in universities each year. 

These university students represent the future workforce and leaders of the nation but often grapple with significant gaps in their financial knowledge, making them ill-prepared to navigate the intricacies of personal finance. The prevailing educational system in Bangladesh has failed to incorporate comprehensive financial literacy programs into the curriculum, leaving non-business students with limited exposure to critical money management concepts.

A closer examination reveals specific challenges faced by Bangladeshi university students in terms of financial literacy. Firstly, there is a lack of formal personal financial or money management education for students who are not from business backgrounds. Dedicated courses or modules on financial literacy are conspicuously absent from university curricula. Such a gap leaves non-business students without essential knowledge in areas like budgeting, savings, investing and debt management. 

An empirical study by Rabbani (2020), showed a basic financial knowledge of business students amongst the BBA and MBA students of Dhaka University based on a sample size of 167 students amongst which 68% had moderate to high knowledge however the expected figure was close to 90%. This suggests that, if business students possess a moderate level of financial knowledge, then there is a higher chance that the knowledge of other students will be much lower. 

Inadequate personal financial education for general students especially in universities across Bangladesh have a profound and wide-ranging impact. As many young adults graduate from universities without a solid grasp of fundamental financial concepts like budgeting, saving, investing, and debt management, they find themselves vulnerable to a host of financial challenges that can have lasting repercussions. 

Secondly, students in Bangladesh often grapple with limited access to financial resources, including basic banking services and investment opportunities, which hinder their ability to practise and develop crucial financial skills. 

According to a study conducted by Shanto (2023), 62% of adults of working age in Bangladesh do not have an account at a formal financial institution. Furthermore, according to the Global Findex 2021 survey, 36% of unbanked adults worldwide have claimed that financial services are too expensive and 27% of the unbanked adults have claimed that they do not have the formal documentation needed to access bank accounts. Furthermore, 23% of the unbanked adults claimed distrust towards financial institutions. The survey also stated that Bangladesh has 4% of the world's total unbanked adults by region. 

Thirdly, a pervasive ignorance of financial risks prevails among many students who are unaware of potential future financial pitfalls like loan repayments, credit card debt or investment risks due to insufficient guidance and education. 

A study by LeBaron et al. (2020) discovered that in Malaysia, parents' financial knowledge and mentalities, along with their financial assets and status levels, impact their children's financial behaviour (measured in terms of their degrees of obligation). This can also stand as a reason in Bangladesh given the similar geographic attributes behind the ignorance of financial risks. If parents are not well informed and educated in personal finance, and are unable to educate their children in financial pitfalls, ignorance towards money management will persist among the population. 

Moreover, students in Bangladesh are highly susceptible to peer pressure and consumerism, resulting in impulsive spending habits and an overreliance on credit, as they have not been adequately educated about the long-term consequences of these behaviours. 

A study by Norashikin et al. (2013) investigated that most university students' spending capacity is now motivated by their wants rather than their financial needs. Students spend over 82% of their money on entertainment, clothing, cosmetics and travel instead of saving or having a proper budget. 

This may occur due to a lack of knowledge of personal finance or money management which makes the non-business curriculum students more susceptible to poor financial decision-making, such as overspending, investing in high-risk ventures without understanding associated risks, or neglecting to plan for unexpected expenses, all of which can significantly impact their financial well-being.

The need for inclusion in the curriculum
Incorporating financial literacy into the curriculum ensures a student's betterment. According to Dunn (2013), the period right after high school is a crucial time for young students who are not of business background to establish a positive credit history since they are just beginning their journey towards financial independence. 

Without a proper personal financial education, young individuals may resort to trial-and-error methods to manage their finances, which can be costly in the long term, potentially leading to poor credit records and higher borrowing costs. 

If proper financial literacy for non-business students is incorporated into the curriculum in college or early years of university, it can have a positive ripple effect.
Role of parents and educational institutions
Parents play a crucial role in reinforcing financial literacy concepts learned in school. Schools can provide resources and guidance to parents on how to engage in financial discussions with their children, set financial goals as a family, and lead by example in responsible financial behaviour. 

Encouraging open and non-judgmental conversations about money at home can help children develop a healthy attitude towards finances. Parents can also involve children in household budgeting, savings plans and decision-making related to family finances.

On the other hand, educational institutions, including colleges and universities, play a pivotal role in promoting financial literacy among students. They are responsible for designing and implementing a curriculum that includes comprehensive financial education that covers a wide range of financial topics from basic concepts like budgeting and savings to more advanced ones such as investing, retirement planning and understanding financial markets. 

A study by Bernheim, Garrett, and Maki (2001), found that 14 state financial education policies on savings had a positive effect in the United States. This suggests that educational institutions in colleges and universities in Bangladesh can follow this example.

In the classroom, qualified teachers and instructors in education institutions can deliver financial education effectively, using engaging teaching methods and resources to make financial topics relatable and understandable. 

These institutions can also ensure that students have access to various resources related to financial literacy, including textbooks, online courses, interactive simulations, and other educational tools. Education institutions are at the forefront of equipping students with the knowledge and skills necessary to navigate the complex world of personal finance successfully.

Farin Sabrina is a BBA student at Brac Business School, Brac University. Email: farin.sabrina@g.bracu.ac.bd. 

Dr Mohammad Enamul Hoque is an Assistant Professor at Brac Business School, Brac University. Email: enamul.hoque@bracu.ac.bd.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.