Teens fail financial literacy test

Teenagers seem to grow more tech-savvy daily, but a new report says they're losing ground in everyday money smarts. The report, by Jumpstart Coalition for Personal Financial Literacy, says that less than half of high-school seniors qualify as "financially literate." Jumpstart is sponsored by corporations, not-for-profits, foundations and government agencies.

What does financially literate (or illiterate) mean? When a professor working for Jumpstart administered a 31-question personal-finance quiz to high school seniors, the average score was 48.3 percent. The quiz covered several areas, including taxes, money management, savings and investment, insurance, spending and debt.

Here's a sample of the questions. See if you know the answers.

•If your credit card is stolen and the thief runs up a total debt of $1,000, but you notify the
issuer of the card as soon as you discover it is missing, what is the maximum amount that you
can be forced to pay according to Federal law?
a) $500
b) $1000
c) Nothing.
d) $50
Just 13 percent of high-schoolers knew the answer is d).

•Sara and Joshua just had a baby. They received money as baby gifts and want to put it away
for the baby's education. Which of the following tends to have the highest growth over periods of
time as long as 18 years?
a) A checking account.
b) Stocks.
c) A U.S. Govt. savings bond.
d) A savings account.
Only 17 percent of high-schoolers got the right answer, b). (Maybe that's not surprising, given recent stock-market news.)

•Many young people receive health insurance benefits through their parents. Which of the
following statements is true about health insurance coverage?
a) You are covered by your parents' insurance until you marry, regardless of your
age.
b) If your parents become unemployed, your insurance coverage may stop,
regardless of your age.
c) Young people don't need health insurance because they are so healthy.
d) You continue to be covered by your parents' insurance as long as you live at
home, regardless of your age.
Only 40 percent of high schoolers correctly guessed b).

College students did better on a Jumpstart quiz designed for them, averaging a score of 62.2 percent. College seniors did the best, averaging 64.8 percent. That's still not great, though. In my book, 64.8 percent is a solid "D." 

More disturbing, the report indicates that current personal finance education doesn't help. High school seniors who had taken personal-finance courses didn't do much better on the quiz than those who hadn't. Some of that may be due to the fact that half took the courses before senior year, when issues like college loans, jobs, and car insurance may not have been as great a concern, says the study's author, Lewis Mandel, a visiting professor of finance and business economics at the University of Washington. But, he notes, it also "points to the need for better materials and teacher training."

And probably more good lessons at home.—Tobie Stanger

Comments

[Richard Outram CPA]

I absolutely endorse the last comment that the most significant influence is at home. Talk more to your kids at an early stage about the basics of money management and be the role model through your own actions.

A new book "The Adventures of Exokid and the Teachings of Money" provides a good jump start for active home discussions.

[JamesAven]

I have been using Desktop Budget from http://Spryka.com to manage my personal finances for a few months now. Its the easiest to use free, offline personal finance software I have seen so far.

[Chicago MOM]

I agree and have founda great resoure at school2life. These ladies taught my children about money and careers. I even learned few things!

[Carl]

I think your readers will enjoy the lessons at Financial Tales.