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Consumer Finance

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Consumer finance overview: Consumer finance is the umbrella phrase for financial management as applied to individuals and households. It includes such topics as:

  • Budgeting
  • Managing payments
  • Saving and investing
  • Borrowing
  • Managing risk

Consumer finance perspectives: Consumer finance can be studied from 3 principal perspectives:

  • Individuals and households
  • Financial companies and the financial industry
  • The broad political economy

Applicability of consumer finance: Apart from its immediate utility to the student, the study of consumer finance also is highly appropriate for anyone who expects to be a financial services professional who will be advising clients on personal finance issues. These career paths include, but are not limited to:

MBA consumer finance courses: Courses in consumer finance are relatively rare in traditional MBA programs, which typically focus strictly on the management of companies and the analysis of corporate financial statements. However, forward-thinking business educators are starting to realize that this is a glaring omission. Without fully understanding the needs of their clients, managers of financial services firms arguably are ill-prepared to serve them. The same is true for people involved in setting public policy related to consumer finance.

Consumer finance at Harvard: In the spring semester of 2008, Harvard began offering a joint elective course in consumer finance for MBA and law school students. It builds upon a two-year-old executive education program designed and taught by Prof. Peter Tufano of Harvard Business School and Prof. Howell Jackson of Harvard Law School. Jackson is an expert in financial institutions who holds a Harvard MBA. The course utilizes concepts from a variety of disciplines, among them behavioral economics, behavioral finance, psychology and sociology.

According to Tufano, as quoted in the September 2009 issue of the HBS Alumni Bulletin, no other business school among the top 20 in the U.S. or the top 5 in Europe offers a course in consumer finance. During its initial semester in the curriculum, this consumer finance course drew 52 students, one third of them from the law school.

Revivals in Consumer Finance Options: In recent years, some national retailers have begun to revive old consumer finance options that had long ago faded into disuse, most notably layaway plans and Christmas clubs. These retailers see benefits for the consumer in offering these alternatives, and thus the promise of increased sales revenue.

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