Brazil has in recent years had an enormous growth in the number of people enrolled in universities. The most important impact of this growth takes place in individual terms, since people who now have access to advanced studies end up with possibilities they would not have had before.
Obviously, this development increases the need for financial education due to the increase of income of those future professionals and especially the availability of credit. How should we deal with this issue? I have the impression that the Brazilian university students are technically prepared to succeed in their professional activities, but are not prepared today to be able to deal financially with their success.
Universities with Financial Education
In preparation for writing this blog, I did a brief search trying to find universities where personal finance is taught. I found only one university, in the south of the country, the Federal University of Santa Catarina, in the beautiful coastal city of Florianopolis. Their professor, Jurandir Macedo *, CFP, Ph.D., teaches an elective course on the subject.
I wonder why universities do not usually teach their students about personal finance. I have two hypotheses.
- Maybe the area of personal finance is seen as content that is not connected to the profession that the students are studying. In other words, personal finance is nice to have but unnecessary content to the student’s future professional activities.
- Maybe, theoretical basis of the contents of personal finance might be seen as a set of practices and rules that don’t have a solid enough foundation to deserve similar treatment to other financial content such as corporate finance.
I understand that the first hypothesis has some truth, but there are other courses that are often taught in college that also are linked to personal life-building. For example, physical education courses (even those linked to quantitative content), courses on ethics and religion and others. So, why not have a personal finance department?
Markowitz and Modigliani
My second hypothesis (about the lack of theoretical background) seems wrong by definition. Many of the main issues that arose in finance have their origin in the study of individual behavior toward money. I cite among them the theory of Modigliani’s life cycle, studying habits of saving and risk aversion at different stages of life, and the Markowitz Portfolio Theory, which provides guidelines on how people can optimize their portfolios principally for retirement . Lastly, there is behavioral finance which is increasingly present in scientific studies where scientists are trying to understand economic decisions. I understand that the practice of personal finance has solid support in different sciences, therefore a class full of practical recommendations would be useful to people.
Perhaps my two hypotheses are not correct and the fact that personal finances are not taught in Brazil is due to the simple fact that until recently, due to the erratic course of the Brazilian economy, there was no need for long-term financial planning. It is possible that the demand for this type of content is increasing within our school system. If this is the case, then we have to decide who should be teaching these financial courses. I personally think that this space can and should be occupied by CFP professionals.
*Jurandir Macedo is also a founding member of FPSB, the owner of the CFP credential outside the US.