Good morning! Today we are part of a roundup organized by Shannon of The Heavy Purse around financial literacy. As the theme was talking about your big realization that money was super important to live a good life.
For me, financial literacy is very important from an early age, so you can avoid costly mistakes that will impact most of your adult life. When I was a student, I was lucky to have my financial life together, thanks to my parents mostly, as we barely talked money at school.
I realized early that I needed to work hard and save aggressively if I wanted to buy freedom and design the lifestyle I really wanted.
But not all students were in the same mindset, some had never had money management lessons and were clueless with money.
Which is why today, as we try to raise awareness about financial literacy, I have interviewed Gene Natali, who co-authored a book called The Missing Semester, to help students get financially literate. Enjoy!
Can you please introduce yourself and your project?
My name is Gene Natali, Jr. I am a Senior Vice President at C.S. McKee, L.P., a Pittsburgh based institutional investment firm. I hold a bachelor’s degree in economics from Allegheny College, and an MBA with a concentration in finance from Carnegie Mellon University’s Tepper School of Business. I am currently a Level III candidate for accreditation as a Chartered Financial Analyst.
I co-authored “The Missing Semester”, an award-winning financial guide for young adults. The Missing Semester is being used by high schools, colleges and organizations across the country. The stated goal of the book is to transfer ownership of the ideas within, to the reader.
Why did you feel the need to write The Missing Semester?
We saw friends, family, and acquaintances who were well educated with good jobs, BUT who were facing some pretty tough financial challenges and uncertainties simply because they weren’t taught how to avoid the mistakes, and how to make smart decisions about money. We call the subject “Money 101”, and consider it to be broadly speaking the most under taught subject in America. Our hope was that if we caught readers when they were young, that maybe they would be better prepared for the money decisions that all of us face.
This is a subject that impacts 100% of Americans. Every high school or college will have its share of teachers, doctors, mechanics, engineers and even dropouts – ALL will make decisions about money. Preparation is a condition that we are in control of, and being properly prepared can help many people avoid the mistakes, and ultimately gain financial freedom.
In your book you cover the basics of personal finance, debt, interest, student loans… Do you think those should be taught at school?
Yes – Absolutely (can I emphasize that )! But more importantly than my opinion, is the opinion of students, and we believe that students think so as well. Based on our experiences in the classroom, and hearing from readers – Students are INTERESTED in this subject! During the school year I frequently speak on high school and college campuses. The enthusiasm and excitement that we are consistently seeing is inspiring.
What is the state of student financial literacy those days?
National statistics suggest that student financial literacy is pretty poor, but improving in some pockets (albeit not as fast as it should be). I spoke with a Senator from Utah to commend her on the state taking a leadership role when it comes to financial literacy in the schools. Her answer surprised me: “Thank you, but we’ve set a pretty low bar and we have a lot of work to do.” Her reply probably sums up the question better than I could.
The good news is that in addition to the schools, there are countless people and organizations working tirelessly to improve student financial literacy. Groups like Jump$tart, Junior Achievement and EverFi come to mind. The financial services industry is becoming more involved with educating clients. Hundreds of personal finance bloggers, writers, and journalists work day in and day out to help improve people’s financial lives. This is important because our spending needs are uniquely personal, but with having this many options available motivated students are sure to find something that resonates with their own personal lifestyle.
How can a young adult make sure he or she gets a great start financially?
The best advice I can give is to Start Now. Recognize that “age is an opportunity” (it’s good to be young). And while there are always ways to catch up, the best approach is to get a head start and not play catch up. Saving as little as $1 or $3 a day in an S&P index fund, consistently, from a young age, can be a pretty big deal when you turn 65.
Taking steps to educate yourself and having a plan are critical to success. One of our favorite assignments that have been used in conjunction with ‘The Missing Semester’ comes from the University of Pittsburgh. Students create a personal financial plan where they outline 1-year, 3-year and 5-year financial goals. We show samples on our website, and it’s exciting to see this level of preparation and detail from college students. I have had the opportunity to speak with students after the assignment, and the response has been quite positive.
Do you think it is more important to manage the small expenses a student can have in college or focus on going to the cheapest college possible that offers a quality degree in order to lower tuition costs?
Education remains the greatest form of empowerment, be it college or “other forms”. So the pursuit of education is quite important. But each of is unique, and it is important to consider possible careers, and the possible paths to attain that career. For instance you don’t want to graduate with six-figure college debt into a career that has peak earnings of $30,000 – $45,000. To your earlier question, it’s important to have a plan in place so that you understand your future expenses (i.e. needs and obligations), and your potential income. Having a plan, allows you to consider different paths to accomplish your goal(s) and the costs associated with those paths.
You recommend starting investing as early as possible, and even cover saving for retirement in The Missing Semester. When people are torn between paying off student loans and saving for a house or retirement, what do you suggest?
First, for recent graduates – if your company offers a 401(k) and matches a certain % contribution – you should immediately (i.e. first day on the job) contribute the maximum that the company will match. While there is no free lunch, this comes pretty close – consider it a pay raise.
The question is a little more complicated for those who don’t have a 401(k). If you have student loans at 6.5%, and you repay them more quickly (i.e. paying more than the minimum), you have in essence generated a return (by avoiding the 6.5% interest on the extra payments) . I have spoken with recent graduates who were able to find a balance between the two. For example, start a Roth IRA, and contribute just a small dollar amount each quarter, while focusing most of their efforts and dollars on paying back student loans. While there is no “one size fits all” answer, this is a pretty good approach because it creates the foundation for future saving.
Finally, what is your advice to a young graduate who did it all wrong through college (expensive useless degree, credit card debt, a big car loan and no good job lined up) once they decide to put their finances together?
Recognizing the need to put your finances together is a first step in the right direction. Be realistic with your goals, your spending needs and your saving needs. Create a plan (i.e. budget) and stick with it. I received an email from a recent graduate who had $22,000 in loans and credit card debt, and had just never thought about her money choices. After reading ‘The Missing Semester’ she paid off her loans in 18 months, and instead of buying the purse (her stated “reward” for paying off the loans) which she had put a picture of on the fridge, she started her Roth IRA before rewarding herself. Spending money is easy, but like most things in life, it should be done in moderation. At this point in life, let your savings dictate your spending – not the opposite.
If you have any questions for Gene, please share in the comments below!
Brian @ Luke1428 says
“…Students are INTERESTED in this subject!” Absolutely…they are hungry for it! As a high school personal finance teacher I see this in my classroom. Kids really perk up when you start talking about money. Just makes me realize how little money management training/teaching they are actually receiving in the home.
As close as we came to home management skills in UK schools when I was growing up was Home Economics. This particular class seemed to center more round the home part than the economics portion. I certainly learned how to turn on a gas cooker without blowing it up but we didn’t cover budgets and household expenses. I’m sure we could have covered more money subjects than bready subjects.
John @ Sprout Wealth says
Great point on age being an opportunity! So many, myself included, believe that if we start in little amounts then it won’t make a difference. That’s simply not the case as you want to allow time to do its magic. It may not seem like much now, but years down the road you’ll be glad you started young.
Mario Adventuresinfrugal says
Uh oh. I notice that “The Heavy Purse” is crossed out. Did I miss something? As for Gene, that’s really great. It’s important to be realistic and have a plan. Recent grads have a lot more options available to them than they think
Shannon @ The Heavy Purse says
I agree wholeheartedly, Gene. Kids are very interested to learn about money. In fact, they are EAGER and HUNGRY to learn. They realize the role money will play in their lives. Financial literacy is something that affects everyone because everyone does handle money and make decisions with how to use their money regardless of how much money they have. It makes very happy to that you’re playing a big role in helping educate our children how to use their money. I agree it’s a sadly underserved topic and yet so very important to our financial well-being. Thanks Pauline for participating in The Financial Literacy Awareness Carnival.
Laurie @thefrugalfarmer says
Gene, thank you SO much for all that you do for students. It scares me, honestly, how little our graduates know about money when they leave school. It’s great to see so many people like yourself working so hard to educate our young people.
I love this! Thanks Pauline for this interview. I hope this kind of program spreads quickly because of the great need. How great that the kids are enthusiastic for it too. Since money is so taboo in our society they could be really hungry for information.
When I was a student, it was hard for me to understand something about financial literacy. But it took an additional course, and learned how to manage my money. It turned out to save more. Everyone should understand at least basic concepts of financial literacy. Also it is easier for me to find a nice job.