Study: Financial literacy down for high school seniors

WASHINGTON (4/10/08)--High school seniors' knowledge of finance has dropped the past two years, says a new study. That doesn't mean, however, that credit unions' financial education efforts are for naught.

High school seniors, on average, answered correctly less than half (48.3%) of questions about personal finance and economics in a nationwide survey released Wednesday by the Federal Reserve. The survey is conducted every two years by the Jump$tart Coalition for Personal Financial Literacy, an organization that promotes financial competence for students.

The score compares with 52.4% answered correctly in the 2006 study. This year's was the worst score out of the past six surveys conducted so far.

While the results are disappointing, they are "not entirely a surprise because financial education is required coursework in only a handful of states," said Jim Hanson, vice president of personal finance with the Credit Union National Association (CUNA).

Credit union financial education efforts make a difference, "but it is difficult to measure the successes we've had," Hanson said. "Credit unions in all areas of the country can point to their efforts in schools and through organizations like the NEFE (National Endowment for Financial Education) High School Financial Planning Program, knowing they reached a half million young people. But success is hard to measure."

CUNA has online programs like Guides to Independence that many teachers use in schools, and these help. "But the unfortunate truth is most young people get most of their financial education at home--and their parents don't know enough about money management," Hanson told News Now.

"We know from pilot studies conducted for CUNA's Googolplex products that financial education works, but the effort has to be consistent, sustainable, relevant, and experiential. People learn by doing. They also learn when the subject matter is relevant to them--most high school kids aren't thinking about investments," Hanson said.

Two years ago, CUNA held its first Financial Literacy Summit. "The No. 1 issue mentioned by nearly every speaker and credit union participant was measuring success," Hanson said. "There are a ton of financial education programs, but the problem is measurement. And every two years we get reminded how much work needs to be done."

Hanson noted the recent trend of consumers overspending their budgets. "That means parents aren't managing their money very well. Is it really a wonder that their children don't know enough about finances? They model what they see," he said. "Clearly we need to start at an early age to have a lasting impact."

It's also a question of resources in schools and credit unions. "Royal CU in Eau Claire, Wis., just opened its ninth elementary school branch office last week," Hanson said. "Its chairman, John Sackett, told me he could open more branches tomorrow, but the credit union just doesn't have the resources. That story could be repeated at every credit union committed to financial education and community service."

College students--surveyed for the first time in the Jump$tart Coalition study--did better than their high school counterparts in the study. College seniors did better than college freshmen, suggesting that experience may be a factor.

The first time many people manage a budget is when they leave home, often for college. "That's where student-run college credit union programs can be helpful. And online tools like MoneyMix--programs that have young people talking to young people about shared experiences--can be very beneficial," Hanson told News Now.

Are there too many financial ed programs? The confusion isn't that there are too many programs, but "the problem is that many are not relevant to the target market or they aren't used," said Hanson. "What good does it do a credit union to have a youth club that doesn't make financial education part of the program? It may generate deposits from parents and grandparents, but if it doesn't include relevant education, what good is it?"

"We make young people practice and take written tests and road tests before they can drive," Hanson noted. "But for many the first time they get their credit card is after they leave home, and they have no idea how to use it responsibly."

What should credit unions who want to help do? "Get involved," Hanson advised. "Stop worrying about the return on investment of helping young people because waiting to determine when it will pay off financially is not the right reason to do this.

"Credit unions are about helping people help themselves. That's what financial education does, and every little bit you can do will help--even if it's only one child."

Other findings in the survey:

• Only 16.8% answered correctly that stocks likely would offer the higher growth over 18 years of saving for a child's education. And 37.3% thought a U.S. savings bond, noted for its conservative investments, would offer the highest growth.
• Nearly 53% said they would have no liability if a thief stole their their credit card and ran up $1,000 in debt on the card. Liability is limited to $50 after the credit-card issuer is notified. Only 13% knew they might have to be responsible for $50.

For a complete report and resources to serve youth, use the resource links.

courtesy of cuna.org