Survey reveals most students are financially illiterate

Senior Emily Ranson surveyed WCU students on their financial literacy and found that 87.9 percent of them failed.

While growing up in Charlotte, Emily Ranson knew she was fortunate to come from a loving and supportive family. But it wasn’t until she came to Western Carolina University that Ranson discovered just how fortunate she was.

Now, as she prepares to graduate Saturday, May 6, with degrees in business administration and law, finance and management, Ranson has helped lay a foundation that may benefit future Catamounts who aren’t as fortunate as her. After taking Finance 210, “Managing Your Money For Financial Success,” in the fall, Ranson completed an undergraduate research project this spring examining the financial literacy of WCU students. Her research was done without course credit.

After surveying nearly 400 students, Ranson discovered that 87.9 percent of those students failed the financial literacy assessment. She, along with Finance 210 instructor Patrick Payne, are hoping those numbers will lead to the course becoming a requirement for future WCU students.

“I grew up in a bubble, honestly,” Ranson said. “Coming to college, I realized that not everyone has that (support). You have students who are completely financially independent from the time they graduate high school, and they probably don’t have the support like my parents gave me, where they were coaching me through everything.

“I think that’s vital in a students’ livelihood. If they don’t understand the financial investment they’re making by going to college, or how to manage that, they can’t expect to live a life where they’re not struggling with finances.”

Ranson’s passion in this area actually began when she was a freshman and was encouraged to join the Student Government Association by a student who was a standout in the finance department. With the seed planted, Ranson’s view on financial literacy really came into view while taking Payne’s class.

After becoming aware of a survey developed by Texas Tech professor Sandra Huston, Ranson decided to use it to see where WCU students stand. After adding a few questions to get specific demographics such as age, gender and major to see if there were any correlations, the survey was administered both online and in some cases by hand where Internet access was unavailable. Assisting in administering the survey were the SGA and the Finance Club. A total of 383 students participated, Ranson said.

“One of the things that hit me the hardest wasn’t really what they scored,” she said. “One of the questions was, ‘Out of these words – freedom, power, evil, fun, joy, happiness, safety, stress-free, control and necessity – pick the top three that you feel relates to money.’ At the top was freedom. The second one was safety and the third one was necessity. I think that the relationship between money and those things is so strong that we really should be doing a better job for our students in educating them how best to use their money.”

The assessment showed that there was a correlation between age and scores. Students 30 years of age and older tended to score a little bit higher, while those in their 20s didn’t fare well.

Ranson, who also served as SGA’s director of internal operations, said they closely observed the students as they took the assessment, and even shot videos of some, with their permission.

“Some students who were a little more extroverted were sharing how they felt about the survey as they were taking it,” she said. “They said, ‘I had no idea. What’s a CD? Is that like what you put in your car? Why is that on here?’

“It’s just 100 percent clear that this is an area that no one covers. Most people don’t get it in high school. And college is a time where you would need to be financially literate, especially for going to a university in this region.”

A score of 50 percent or lower was considered failing. Of students who had not taken Finance 210, only 5.9 percent passed with an 80 percent or higher, which is the benchmark for making good financial decisions. Of those who had taken the class, 38 percent scored 80 percent or higher.

“Western is not unique in any way in these scores,” Payne said. “This is typical of what we see on college campuses, and frankly, among the general populace. The evidence is that people really learn about money the hard way. They learn by falling on their face, and they learn not to do it again. Then, they move forward and they fall on their face again. Just like we saw in our survey, we see financial literacy rising with age up until about people’s mid 50s, and then it begins to decline again as their cognitive abilities begin to decline with age.”

Payne said it’s too early to begin teaching about finances in high school because students that age can’t grasp the importance of things like 401k’s and why they matter. It’s not until they are sophomores and juniors in college that finances and their future start to become important to them.

“If you give students the tools, they can figure out how to use them,” Payne said. “It’s just they don’t have the tools so they wind up learning the same way their parents did, by falling on their faces. We would like to prevent as many faceplants as humanly possible.”

Payne’s class is currently a liberal studies elective course with 150 to 200 students taking it each year. But with nearly 11,000 students enrolled at WCU, Payne said his course isn’t “even making a dent.”

Payne and Ranson would like to use the data to emphasize to administrators how much of a problem financial literacy is in hopes of getting it to become a required course. Ranson said 85 percent of the students surveyed said they would be in favor of incorporating a financial literacy course into their liberal studies.

“I think that the purpose of an education is to give you the tools that you need to be successful for the rest of your life,” Ranson said. “This is undoubtedly a tool. When you hear the words freedom and safety and necessity, I’m sorry, but that ranks higher in my book than taking another liberal studies like a history class, which is also important, but maybe not in your day-to-day management of your life.”

Before leaving WCU, Ranson plans to speak with incoming SGA president Katherine Spalding, a sophomore from Fuquay-Varina, about the survey results.

“She is passionate about this issue, as well, and is fully on board with taking the results of this to our Board of Trustees just to show them the need at Western,” Ranson said.