MBA students need to develop the knowledge and skills to manage their financial resources effectively so that they will have a lifetime of financial wellbeing. Most MBA programs do not help their students develop financial literacy. Accordingly, developing the knowledge and skills to become financially literate is an individual MBA student’s responsibility.
As a newly accepted MBA student or a currently enrolled MBA student, are you prepared to address the financial wellbeing issues resulting from your participation in an MBA program?
April is financial literacy month in the United States. However, generally, financial literacy is not a discernible part of the modern-day MBA curriculum. Designers of MBA curriculum either assume: 1) that MBA students will extract the bits and pieces from the curriculum—as they progress through their program—to make them financially literate and better managers of their personal-financial resources or 2) that financial literacy development is not appropriate for an MBA program. Thus, most MBA programs focus on helping managers and leaders become more effective at managing an organization’s resources and very little, if at all, on helping them to become more effective managers of their own resources. In my opinion, the skill sets and knowledge that make up financial literacy are as critical to an MBA graduate’s career success and wellbeing as are the concepts included in the MBA curriculum.
What is financial literacy?
On January 22, 2008, President George W. Bush signed an Executive Order creating, for the first time, a President’s Advisory Council on Financial literacy. In their 2008 Annual Report, the Council defined financial literacy as “the ability to use knowledge and skills to manage financial resources effectively for a lifetime of financial well-being.” Additionally, they go on to define financial education as “the process by which people improve their understanding of financial products, services and concepts, so they are empowered to make informed choices, avoid pitfalls, know where to go for help and take other actions to improve their present and long-term financial well-being.” (Page 33)
Variations of this definition abound. However, the focus of the Council’s definition is on individuals’ developing skill sets and knowledge that will help them to make informed and effective decisions regarding all of their personal financial resources for a lifetime of wellbeing. The thinking is that developing these skill sets and knowledge effectively makes one financially literate, which should lead to improving his or her overall wellbeing and—more specifically—one’s financial wellbeing.
In a previous MyeEMBA article, “Action Planning – Mitigate Sacrifices of Earning an MBA,” I write about financial wellbeing using concepts from Rath and Harter’s book, Wellbeing: The Five Essential Elements. They argue that financial wellbeing is all about effectively managing one’s economic life. The logical extension of this argument is that one needs knowledge and skills in order to manage effectively one’s economic life or financial resources, thus acquiring financial literacy. In a subsequent MyeEMBA article, “Financial Wellbeing While Earning My MBA,” I introduce post acceptance/pre enrollment financial planning action steps that most MBAs can use proactively to manage their short-term and long-term financial wellbeing.
Becoming Financially Literate
While the Wellbeing book and the MyeEMBA articles provide a starting point for MBA students to becoming financially literate, they need access to more information. The following resources can help MBA students to develop or improve their financial literacy at their own pace and in response to life events, such as buying a home, borrowing money for education, etc.
- 360 Degrees of Financial Literacy – a website that provides access to a free program provided by the nation’s CPAs (AICPA) to help Americans understand their personal finances through every stage of life. This well-organized website provides access to topical information about credit and debt, recent legislation, paying for education, etc. and offers a large number of calculation tools that help you to see the impact of your decisions under consideration, such as contributing to an IRA, changing mortgages, borrowing, etc. The site also provides access to a panel of CPA Personal Financial Specialists who act as “Money Doctors” and answer questions from individuals.
- GetSmarterAboutMoney.ca – a website that provides access to a free program that develops and promotes unbiased, independent financial information, programs and tools to help individuals make better financial and investment decisions. The site’s content is similar to the CPA site with one exception; this site includes a wide range of educational materials appropriate for all ages and grades that teachers and home-school parents can download and use.
- MyMoney.gov – a free U.S. Government-sponsored website dedicated to teaching all Americans the basics about financial education. Twenty-one federal entities that compose the Financial Literacy and Education Commission provide the materials that are available via this website.
Do you have suggestions for ways to develop the financial literacy you need? Please share your thoughts by adding a comment below.
About the Author: Dr. Rodney Alsup is the creator of the MyeEMBA blog. His goal is to help MBA students live and work smarter while they earn their MBA.
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