An ominous 2014 Forbes magazine article title reads: “The Financial Literacy Gap Costs College Graduates Thousands.” Referencing potential damage to the economy, the article urges, “It’s time to teach personal finance and investing in schools to offset what kids learn at home.” Recognizing a similar gap closer to home, the Digital Enterprise Management, with professor Radha Maharaj from the ICCIT faculty at UTM, is hosting a series of financial literacy workshops in order to help prepare students for financial success. The first in the series held on Wednesday last week, Personal Finance 1: Getting some Perspective, was an introduction to financial planning.
The first workshop was one of three sessions that will focus on different aspects of financial success such as personal finance, investing, and understanding credit cards. Maharaj recognized that finance is “not something that’s so inviting to people,” and hopes that this series will enable students to feel more confident and prepared to handle their finances now and in the future.
Maharaj acknowledges the importance of being financially healthy, as she believes it transcends into all aspects of life. She says her motto is “Finance is more than just the numbers”. According to Maharaj, all aspects of life are interconnected to finances because money enables us to partake in experiences, purchase material goods, and support our professional and personal goals. Even if your goal is as straightforward as finding a job, you need money to purchase professional clothing and arrange transportation to go to the interview. Having a strong understanding of finances, the ICCIT instructor explains, empowers us to strive towards our goals, regardless of how independent they may seem to be from money.
As Maharaj notes, students have a unique relation to finances. Millennials, for example, are more likely to invest money on experiences as opposed to their parents, who are more likely to invest in material goods and assets. “Financial planning is essentially life planning,” says Maharaj, “If you really want to be financially successful, you have to figure out what it is you want [in life]”.
Maharaj encourages students to start focusing on building financial literacy and confidence as soon as possible. Having worked with clients with over $200,000 salaries, the instructor says she has seen people with a savings account of over $300,000 or people who are $90,000 in debt. Maharaj emphasizes that you can be intelligent and successful, yet still struggle with finances. To combat overspending, It’s important to start being mindful about how you spend your money, as Maharaj suggests, “It’s the behaviour training you have to start now.” She urges students to understand how to build a financial base while managing the inflow and outflow of money. A financial base is a person’s desired wealth base, and the resources they wish to acquire to achieve it. Additionally, the U.S Small Business Administration, in a 2018 article by their Senior Area Manager Eric Glitner, identifies cost analysis for constructing a financial base as crucial to overall financial management.
“You can’t do anything in one day, but you can build your base little by little,” says Maharaj, further encouraging students to begin getting in the habit of saving as little as just $20 a week to start building a healthier financial base.
According to Maharaj, there is a formula to getting rich and “it’s not a mystery.” Maharaj believes that in order to become financially successful, you need to “spend less than you earn and invest for a long period of time for a good rate of interest.” Although simple, this method of building wealth is effective because it focuses on mindful spending and smart investing. “The fact is, if you always live under your means, the beauty of compounding works; it’s magic,” says Maharaj.
There are many different ways in which people are motivated to spend money. These influences vary by cultural background, values, personality, and an individual’s attitude towards money. “It’s a little bit of self-analysis,” says Maharaj. It’s important to set goals for yourself so you understand what you value both personally and financially. Maharaj gave students a worksheet in which they were instructed to make goals for themselves for the next upcoming three months, nine months, one year, three years, and five years. This exercise, Maharaj explains, aims to assist students with understanding what they value in life, so they can invest financially towards these goals. “Finance isn’t dry. It’s about having a good quality of life,” says the instructor.
Her final tips for students in this workshop were to open a tax-free savings account and start saving at least $20 a week to build healthy financial habits and to work on your life goals. “If you don’t know what you want, how can you get to where you want to go?” asks Maharaj.
Ultimately, “Personal finance is a life skill,” says Maharaj. She explains in order to become financially successful, you need develop focused financial habits that support your personal and professional goals.