America’s Financial Illiteracy
A study, conducted by Lew Mandell of the School of Management at the University at Buffalo, shows how little the average American knows about personal finance. The study was conducted for the Jump$tart Coalition for Personal Financial Literacy . Although the 2006 study shows an improvement from past years, the average score was a failing 52.4%. [Actual survey: 2006SurveyWithAnswers.doc]
An example of some of the questions:
In the survey, 55.8 percent said they would have no liability if their credit card was stolen and a thief ran up $1,000 worth of debt. (Liability is limited to $50 after the credit-card issuer is notified.) Only 15.1 percent knew they could be responsible to pay $50. Two years ago, 18.1 percent gave the correct answer.
Only 14.2 percent correctly said that stocks likely would offer the higher growth over 18 years of saving for a child’s education. That was down from 17.2 percent who knew the right answer in the 2004 survey. In this year’s survey 44.8 percent thought a U.S. savings bond — one of the most conservative investments — would offer the highest growth…
Some other results in the survey:
—Just 22.7 percent knew that income tax may be charged on the interest earned from a savings account at a bank if a person’s income is high enough. Nearly 51 percent said that earnings from savings account interest may not be taxed. In the last survey, 23.9 percent chose the correct answer.
—Nearly 38 percent correctly said that retirement income paid by a company is called a pension. That’s up from 34.2 percent who answered right in the last survey. Still, close to 59 percent in the current survey thought it was called Social Security or a 401(k).
—Only 28.6 percent knew that a bond issued by one of the 50 states is not protected by the federal government against loss. More than 49 percent said that a certificate of deposit at a bank is not protected; in the previous survey 35.3 percent chose the right answer, that it is federally insured.
[Full story at FOXNews.com]
Does this study accurately show that America’s youth are relatively illiterate? Is this a problem? What can we do to increase understanding of personal finance?
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Financial Service companies are racing to fill this void, and develop materials to be used in school in exchange for the use of their logo on the material, as lawmakers are considering several bills to require financial literacy education by graduation.
Article from The Wall Street Journal