Unlike the great singer Sam Cooke, young physicians actually do know a lot about biology and the science book.
Some of them even know something about the French they took.
But they don’t know much about money.
That’s not just us talking. That’s the result of a 2017 study recently published in the International Journal of Medical Economics.
Researchers from the Washington University School of Medicine and the University of Arizona College of Medicine surveyed 2,010 residents at two different academic medical centers about basic financial and personal finance questions, as well as some questions about their own personal approach to financial planning and debt management. The conclusion: “Residents and fellows had low financial literacy and investment-risk tolerance, high debt, and deficits in their financial preparedness.”
Financial Knowledge Test Results
All told, residents were out and out flunking the financial knowledge test: As a group, they scored just 52 percent on the quiz:
- Just 65.4 percent understood that a Roth IRA allowed for tax-free withdrawals in retirement.
- Only 16.1 percent understood why mutual funds are sold with different share classes.
- Just 40 percent of residents with no children understood what a Section 529 College Savings Plan is.
- Only 19.9 percent of respondents correctly understood that if interest rates rise, bond prices tend to fall.
- Just 20 percent of respondents understood what “selling a stock short” meant.
- Less than 40 percent could correctly identify what is meant by the term “junk bond.”
Views and Knowledge on budgeting and debt
The survey also found that student loan debt was still significant, with 48 percent of respondents reporting carrying more than $200,000 in student loans. However, just 20 percent of residents surveyed reported holding credit card debt that would not be paid off by the end of the month – thereby incurring finance charges. However, of those, 32 percent of them told surveyors that they were carrying $10,000 or more into the next month
About a third of residents reported having difficulty meeting their expenses and/or spending all or more than their income each month. This is despite having income levels close to the national median as residents.
Retirement and Estate Planning
Furthermore, while nearly every personal finance expert would recommend that a physician have a last will and testament, only a small minority of residents – 31 out of 421 – had actually established a will.
The study also found that despite completing medical school and working full-time as healthcare professionals, most residents had a very limited understanding of how health insurance works. Few of them understood that individuals cannot make health savings account (HSA) contributions without being enrolled in a high deductible health plan (HDHP).
About 38 percent of residents surveyed reported having saved nothing yet for retirement, despite earning the median income for U.S. households (albeit carrying significant student loan debt that would put a crimp on their ability to contribute to retirement accounts).
Recommended Knowledge for Young Physicians
The authors recommended that medical schools expand basic financial education programs for physicians. Specifically, they call for programs teaching young doctors and medical students the following basic financial skills and concepts:
- How to make a monthly budget
- Debt and loan management and credit scores and reports
- Savings and retirement planning options
- Life, health and disability insurance and their importance
- Estate planning strategies.
You can see the quiz itself here, along with information about residents’ responses.
The results of the survey underscore the importance of working with a financial professional early and often during your medical career. American medical schools are the best in the world at teaching doctors how to save lives and mitigate illnesses and injuries. But doctors graduate from medical schools and residency programs needing a lot of help in understanding how to make sound financial decisions.