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How Clueless Are College Graduates?

August 19, 2009 RSS Feed Print

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Earlier this summer, when Beth Kobliner, author of the bestseller Get a Financial Life, was interviewed on the Fox Business Network, she said something that struck me as a bit extreme. She said that college graduates—even those coming from the Ivy League—enter the workforce without understanding basic personal finance concepts, including how to rent an apartment.

She said:

Financial illiteracy is rampant, and they'll ask questions like, 'Gee, I want to rent an apartment. How do I get a loan to rent an apartment?' I'm like, 'You don't get a loan. You have to use your income. You have to work and use your income.' Basic, basic concepts they just don't know about money.

I didn't have the impression that college graduates are quite so misinformed. In fact, I thought that most of them understand how to build their credit, take out a lease, and save money. So I asked Kobliner to explain her comments. Does she really think college graduates are so clueless?

She said that a student at a prestigious school really did ask her how to get a loan to rent an apartment. "I don't think the majority of students are like this, but it was surprising to me that anyone super smart would think that," she says. While the financial crisis and tough job market have forced students to educate themselves about money, Kobliner says some students still think they can take out loans to cover living expenses until they can fund their lifestyles with their own earnings.

What do you think—is Kobliner right about the state of personal finance knowledge about recent college graduates? Do people in their early 20s still think they can live indefinitely off of credit card debt, or has the financial crisis showed them otherwise? I'd like to believe that most people have a general working knowledge of how to rent an apartment and live within their means, but maybe I'm being overly optimistic.

For more, read: "Beth Kobliner: Young People Have Opportunity."

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It is entirely possible for a super-smart college graduate to be entirely clueless about personal finance. After all, a lifetime with one's head stuck in books doesn't always leave a lot of room for learning about "real life" and picking up common sense "every-day" knowledge, like how to rent an apartment, balance a checkbook or establish a basic budget.
This is especially true in cases where parents, in an effort to be "supportive" and "helpful", pay for everything, handle all money issues and discourage Junior from getting a job or any non-education related work because her job is to go to school.
Kobliner's comment does not apply to all or a majority of college students/graduates but again, why are we surprised that young people who have FINANCED four or five years of study (average student loan debt upwards of 20K) do not realize they can't finance their post-graduate lifestyles? We taught them to take on debt to finance aspirations and now are "shocked" and "amazed" they do not know that all of life can not be financed. What did we expect would happen when we transferred the burden of post-secondary education from the government to the individual?

Melby of DC 11:44AM August 26, 2009

either have parents who have drilled them about money, OR, they have worked so darn hard to get themselves through that they have a clue how tough real life can be.
I think this girl in the article is an exception---not understanding that all loans involve collateral except credit cards and payday loans (at moonshot rates)and student loans helped along by the government.
Nonetheless, what I think college graduates may not know is how fast the world is changing against them as a group. We are seeing a new "norm" built for the so-called middle class, and (with some exceptions, of course), it's not very friendly to young folks starting out.
First, it was "you now need two incomes to make it". Then, it was "you're likely to owe a ton in student loans that your parents did not". Now, it's "sorry, your job market has downsized".

Muser of NM 3:04PM August 19, 2009

Now I'm making an assumption here....and it doesn't generalize to EVERYONE, but if people at a prestigious school have never *had* to pay for anything, they may not know how to pay for anything.
Most of my friends know we can't live off credit cards, but it's sometimes a necessary evil, especially when you're underemployed in the Boston-Washington Megalopolis, the cost of living being so high and the income being too low to support a life but too high to obtain benefits.

veronica of NH 3:00PM August 19, 2009