High School Seniors Flunking Personal Finance
Financial news fills the airwaves and stocks can be traded from home computers, yet many high school seniors’ knowledge about money management, investing and saving has gone from bad to worse, a national survey suggests.
In a multiple-choice examination given in February and March, 723 soon-to-graduate seniors answered correctly only 52% of the 30 questions about personal finance and economics. That’s a failing grade based on the typical high school grading scale. Three years ago, 1,509 seniors took a similar examination and the average score was 57%.
“Given all the media are doing to popularize personal finance and all the attention riveted on the stock market, you’d think they would be more interested and would be learning more,” said Sandra Shaber, an economist with WEFA Group who once taught economics to high school students.
Stephen Cecchetti, professor of economics at Ohio State University, and some other experts believe low scores could be improved if schools were to focus more on teaching students early on about personal finance and economics or integrate some of the basic concepts in other course work such as math.
Both surveys were sponsored by the JumpStart Coalition for Personal Financial Literacy, a nonprofit group that wants students to have the skills to be financially competent. Lewis Mandell, dean of the University of Buffalo’s School of Management, conducted the surveys.
The latest survey was released Thursday at the Federal Reserve.
In the financial world, “there’s so much choice it’s bewildering. If people are well informed, they can take advantage of the choices; if not, they become vulnerable,” Mandell said. “They’ll invest their money in a stock they saw on TV, take on far more debt than they can conceivably handle in the future, and invest 401(k) money in things that won’t yield the return needed to retire in some years hence.”
In the survey, only 21% knew they might have to pay income tax on savings account interest. Three years ago, 32% answered the question correctly.
Forty-six percent knew that retirement income paid by a company is called a pension, but 30% thought it was called Social Security. In the 1997 survey, about 64% answered the question correctly.
Some other survey results:
* Sixty-three percent said they would have no liability if their credit card was stolen and a thief ran up a $1,000 bill. (Liability is limited to $50 after the card issuer is notified. Only 15% knew they would be responsible for paying $50.)
* Forty-six percent mistakenly said a bank certificate of deposit is not protected by the government; 21% thought U.S. savings and Treasury bonds are unprotected.
* Twenty-three percent correctly said stocks probably would offer the highest growth over 18 years of saving for a child’s education. But 73% said a U.S. savings bond or a savings account would offer the highest growth.
