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New Graduates Could Benefit From Financial Training

Donna Young

Pharmacy-school graduates can expect to draw a good starting salary at their first position, but many may be entering the job market with little or no personal finance skills to wisely manage that money.

David A. Latif, M.B.A., Ph.D., an associate professor of pharmacy administration at Shenandoah University Bernard J. Dunn School of Pharmacy in Winchester, Va., found that soon-to-graduate Pharm.D. students could not achieve a passing score on a test of financial-planning knowledge. The test, an electronic questionnaire on basic financial concepts, was taken by the Pharm.D. class of 2000 during its final semester.

Latif said he had expected the students' average score to be less than 70 percent because other studies had revealed a deficit of financial knowledge among the general public.

What surprised him, he said, was the finding that female students had a higher overall score on the test than their male counterparts. The women's average score was 57.4 percent, and the men's was 56.9 percent.

Latif had hypothesized that the men in the pharmacy class would score "significantly higher" than the women. He based that hypothesis on findings from the National Center for Women and Retirement Research’s Gender Investment Comparison Study, a 1996–9 study funded by the Dreyfus Corporation.

The center's three-year study revealed that adult women had higher levels of "math anxiety" than their male counterparts.

Latif, who teaches courses in pharmaceutical marketing and financial management and previously worked eight years as a financial planner, said the results of his survey suggest that pharmacy students could benefit from having a personal financial planning course in their college curriculum.

Graduating pharmacy students expect to immediately make a substantial salary on entering the work force and often make the mistake of buying a new car or other high-cost item before establishing a budget and a savings-and-investment plan, Latif said.

Many new pharmacy practitioners receive offers of employment with starting annual salaries that range from $70,000 to $90,000, according to a recent report by the Associated Press.

New practitioners, especially those who attended a private university, generally have immediate financial debts that need to be paid. Most notably, hefty student loans.

Latif said 90 percent of students at his pharmacy school borrow at least $18,500 per year and owe about $74,000 in loans by the time they receive their degree.

"Even a few hours of personal financial management training included as part of a pharmacy management course could help students to better manage their finances," he said. Latif tries to incorporate into his pharmacy classroom lectures some of the basic principles he teaches in his financial seminar for elderly people in the community.

He encourages people to spend less than they earn so they have money to invest and save. And new practitioners should always "pay yourself first," he said, by having part of each paycheck automatically deposited into a savings or investment account.

"That way, they don’t miss the money when they get paid, and it is already being added to the savings account without them thinking too much about it," he said.

Latif argued that students who have had some personal financial management training before entering the work force are better employees.

"Studies have shown that poor financial behavior by employees hurts employers because [the employees] are not focused on their jobs," he said.

Employers, he said, should consider providing employees with access to financial management seminars.

Latif said employees often make the mistake of not taking advantage of an organization’s matching contributions in a 401(k) plan.

"That’s free money," he said. "Many people don’t invest enough to get that match or they don’t join the plan. That’s giving up free money."

Latif notes that the Enron scandal should teach everyone the importance of diversification. Investments, he suggested, should be spread among stocks, mutual funds, corporate and municipal bonds, certificates of deposits, money market funds, and securities.

Latif also warns new practitioners to avoid accumulating credit-card debt.

"The average household has $8,000 in credit card debt," he said. "That is a lot of wasted money on fees and interest."

For anyone who was not able to include personal finance training in their formal education, Latif said there are numerous publications and online resources available.

The money section of the U.S. General Services Administration’s Federal Consumer Information Center Web site has free online publications about money, credit, investing, savings, and financial and retirement planning.