The following is a guest contribution and reflects the opinions of the author. Just the scenery. Click here to learn how to submit your work to the Opinions section. here.
We believe that Princeton University, like many other elite universities, is your golden ticket to success in life. But outside the orange bubble, there is a dire warning for us all. That means managing personal finances has become much more difficult, even for people with high incomes. In response to the retirement crisis, universities must emphasize the importance of financial literacy to students.
The retirement crisis stems from the current economic hardship. As of November 2023, 62% of U.S. consumers are living paycheck to paycheck. Household credit card debt has reached an all-time high of $1.08 trillion. Many Americans don't have enough emergency funds, and 22% don't have any at all.
As a result, many Americans are also not on track for retirement. Forty-seven percent of Americans are at risk of not being prepared for retirement, and 28 percent of Americans have no retirement savings at all. The Social Security program is projected to run out of reserves in 2034, and retiree benefits will be reduced to 77% of their original amount. Even as retirement costs continue to rise, our savings aren't keeping up.
Unfortunately, the economic situation for young Americans is getting worse. According to a study by the National Bureau of Economic Research, millennials “had lower median and average wealth in 2016 than any other generation of the same age from 1989 to 2007.” In fact, 70% of Millennials live paycheck to paycheck, more than any other generation according to research. The verdict is clear: America is in a retirement crisis, and things are not getting better for young people.
So what does this have to do with Princeton students? Fundamentally, shouldn't elite universities put students on the path to financial success?
As it turns out, it's not entirely unfounded to think that Princeton graduates are immune to the retirement crisis. The median annual income for Princeton University graduates by age 34 is $90,700. Outside of Princeton, many graduates of elite universities will earn far more than the national median household income of $74,580. Princeton University recently expanded its 100% grant-based financial aid to all students with household incomes up to $100,000, and now 83% of “recent seniors” graduate debt-free. I am.
But even a six-figure income is no longer synonymous with financial security. As of November 2023, 45% of American consumers with annual incomes of $100,000 or more are living beyond their paychecks. So why are so many people, people who are generally considered “financially successful,” struggling financially? Simply put, we earned They don't save enough money. But we already know the solution to that problem. Most, if not all of us, already know that we need to develop good financial habits. The most common financial regrets cited in the survey include “not saving enough for early retirement,” “not saving enough for emergency expenses,” and “not saving enough for an emergency expense.” “I have too much debt,” etc. The real challenge lies in actually implementing that solution.
As psychologist Hal Hirshfield points out, the challenge in preparing for our financial future is that our future selves often feel like complete strangers to us. In Your Future Self, he explains, “We tend to think that the feelings we have in the future will somehow be weaker than the feelings we have now.” Because our long-term financial goals often feel like the distant future, younger generations often don't save for retirement. As a result, we lose our most valuable investment resource: time.
For example, starting at age 25, let's say you contribute $100 each month to an investment account that earns 10% interest compounded annually. If you retire at age 67, you'll have about $645,164. However, if you start investing at age 35, you'll end up with about $241,365. The snowball effect of compound interest can make a difference in achieving your financial goals (you can experiment with compound interest using this calculator).
To address this issue, Princeton University maintains a financial literacy website that includes a variety of resources for students. A notable example is iGrad, a newly released program that offers multiple self-assessments, articles, and videos on personal finance.
However, Princeton University ultimately fails to emphasize enough the importance of financial literacy as an important lifelong skill for students. The university does not require students to study financial literacy, and as a result, personal finance is treated as an optional aspect of education.
But the reality is that financial literacy is not optional. Personal finance is just as important as learning how to communicate with others and analyze the world. We make financial decisions every day, such as buying food, ordering items online, and paying for transportation. Although Princeton University boasts a generous financial aid program to reduce student debt, it has yet to focus on truly equipping students with the ability to manage their own finances after graduation. If Princeton University truly intends to prepare its students for lives of success and service, it must treat financial literacy as a required skill for all students. This could be achieved through new course requirements and online training programs that educate students on topics such as the importance of early investment, the functionality of different financial products, and how to create an effective budget.
After college, many of us will make some of the most important financial decisions of our lives, including applying for a mortgage, choosing an insurance plan, and investing for retirement. However, without prior experience and guidance, it is difficult for new graduates to make the best choice.
Preparing for retirement, as well as keeping track of your monthly expenses, has become an increasingly difficult task. Although it may seem far away now, the day will come when you decide to retire. Don't let your future self regret the financial choices you make today.
Jason Seo is a first-year undergraduate student from Atlanta, Georgia, who plans to major in economics. Contact him at jason.seo@princeton.edu.
