Get access

An Empirical Analysis of the Effect of Financial Education on Graduating Business Students’ Perceptions of Their Retirement Planning Familiarity, Motivation, and Preparedness

Authors

  • Mark L. Power,

    1. Mark L. Power is University Professor and Principal Financial Group Finance Professor, College of Business, 3214 Gerdin Business Building, Iowa State University, Ames, Iowa 50011; phone: 515-294-5651; fax: 515-294-3525; e-mail: mpower@iastate.edu. Jonathan M. Hobbs is a Ph.D. student in Statistics at Iowa State University. Ashley Ober was an Honors Student at Iowa State University. This article was subject to double-blind peer review.
    Search for more papers by this author
  • Jonathan M. Hobbs,

    1. Mark L. Power is University Professor and Principal Financial Group Finance Professor, College of Business, 3214 Gerdin Business Building, Iowa State University, Ames, Iowa 50011; phone: 515-294-5651; fax: 515-294-3525; e-mail: mpower@iastate.edu. Jonathan M. Hobbs is a Ph.D. student in Statistics at Iowa State University. Ashley Ober was an Honors Student at Iowa State University. This article was subject to double-blind peer review.
    Search for more papers by this author
  • Ashley Ober

    1. Mark L. Power is University Professor and Principal Financial Group Finance Professor, College of Business, 3214 Gerdin Business Building, Iowa State University, Ames, Iowa 50011; phone: 515-294-5651; fax: 515-294-3525; e-mail: mpower@iastate.edu. Jonathan M. Hobbs is a Ph.D. student in Statistics at Iowa State University. Ashley Ober was an Honors Student at Iowa State University. This article was subject to double-blind peer review.
    Search for more papers by this author

Abstract

Today's multifaceted and dynamic financial environment requires a high level of individual financial literacy to ensure that sound financial behaviors are the norm. Unfortunately, many individuals have limited knowledge regarding financial issues and are ill prepared to make sound financial choices. The purpose of this article was to benchmark and then determine if graduating business students’ perception of their retirement planning familiarity, motivation, and preparedness improved after taking a semester-long course in Personal Risk Management and Insurance (PRMI). We discovered that business students were more financially literate than nonbusiness students and that business students’ familiarity with retirement plans and personal level of readiness to make retirement planning decisions improved significantly after taking the principles class. Specifically, we showed that only 15.8 percent and 42.3 percent of the nonbusiness and business control students, respectively, felt adequately prepared to make retirement decisions, while 82 percent of the business students who completed the PRMI class felt prepared. Ex post, graduating seniors who were exposed to coursework covering life-cycle risks and options to treat those risks perceived that they are leaving college with a better ability to meet the financial challenges that await them. Last, we showed that significant differences existed in retirement plan and investment familiarity based on gender. Our findings provide support for including financial literacy as a general education requirement at colleges and universities.

Get access to the full text of this article

Ancillary