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The State of Financial Education in the U.S.

Written by Nickel - 20 Comments

As I alluded to in my post about things every teen should know about money, the state of financial education in this country is pretty abysmal. In fact, according to a recent survey by the Jump$tart Coalition, high school seniors were able to correctly answer an average of just 48% of questions about basic financial concepts. While college seniors did a bit better, their 65% average score still equates to a “D”.

Curious about what today’s student do and don’t know? Here’s a sample of the findings from the 31 question survey:

  • Only 48% of respondents knew that a credit card holder who only pays the minimum amount on monthly card balances will pay more in annual finance charges than a card holder who pays their balance in full.
  • Just 40% were aware that they could lose their health insurance if their parents become unemployed.
  • A measly 17% knew that stocks are likely to yield higher returns than savings bonds and checking/savings accounts over the next 18 years even though there has never been an 18-year period where this wasn’t true.

Clearly, we have a long way to go when it comes to educating the next generation about financial issues! I’d be curious to know how my contemporaries would’ve done when we were in high school (or college). Perhaps we weren’t any better off…

On the bright side, 88% knew that a savings account was a good place for money that you’d need to spend on tuition within the next year and 82% knew that certificates of deposit (CDs) aren’t typically associated with spending (yes, that’s from an actual question).

Interestingly, there were also some apparent demographic trends in the data. For example, caucasian students correctly answered 53% of the questions, while Hispanic and African American students correctly answered 45% and 41% of the questions, resectively. Amongst college students, the numbers were 63% vs. 60% vs. 55%.

Published on August 6th, 2008 - 20 Comments
Filed under: Miscellany

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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20 Responses to “The State of Financial Education in the U.S.”

  1. 1
    NCN Says:

    When I was in school, we never learned anything about personal finance or financial management. It could have been that folks didn’t see these topics as important… or, it could have been that so many folks were broke, no one was qualified to teach the class! :)

    Seriously, though, I’ll bet that if you surveyed a group of people in their 40’s, the numbers would be about the same. People focus so much time and energy working, but spend very little time and energy managing their money. In my past, I would have failed miserably if given a ‘personal finance’ pop quiz.

  2. 2
    "Mo" Money Says:

    I am probably typical and learned by trial and error (not good)! We need to help educate our children and get better personal finance education in our schools.

  3. 3
    Richard @ Student Scrooge Says:

    I think part of the problem is a lack of interest on the part of high school students — a good number of high school students will not have had a job before graduating, will not have opened a bank account, etc. The importance of financial education does not seem nearly as “real” in high school. Of course, it seems much more “real” by college, but by that point its hard to get students to learn about something so … “basic.” I don’t know, I think somehow curriculum needs to connect more with students than I think it currently does

  4. 4
    gm Says:

    I think kids also learn from their parents. My folks never held a credit card balance and would sometimes honestly tell me that they couldn’t afford something I wanted. So, their financial caution seems to have rubbed off on me.
    Recently an intern at my workplace bought a luxury car because all her young life “she always wanted one” and she got tired of waiting. Without being judgemental – a person should do what they can afford – perhaps understanding the opportunity cost of commiting this money to a car for so many years may have clarified her decision.

    Understanding debt, and return in a compounding sense is essential to all.

  5. 5
    KC Says:

    I think many of us would agree that as high schoolers we were i nthe same boat. I doubt I would have understood how health insurance worked, or even cared for that matter – somebody would take care of me, right? I knew a little about credit cards and I stayed away from them, but I certainly didn’t fully understand them like I do today. The only thing I probably knew more than the average high schooler was the stock market – I always had an interest there, even as a young person.

    But I think apathy is the main reason they score so low – I know I didn’t fully understand personal finance and the items surrounding it until I got my first job, apartment, and so on. IT just wasn’t that important at that point in my life.

  6. 6
    Paul Says:

    Lol, asian people are never included in surveys.

  7. 7
    Jesse Says:

    Wow, that 17% that didn’t know about stocks….thats scary. Wow.

  8. 8
    nickel Says:

    @Jesse: It’s worse that that… Only 17% DID know about performance differences in stocks vs. bonds, meaning that 83% DID NOT.

  9. 9
    kitty Says:

    ” that stocks are likely to yield higher returns than savings bonds and checking/savings accounts over the next 18 years even though there has never been an 18-year period where this wasn’t true”

    Never? Really? What about September 3rd 1929 to 1947?

    After the crash of 29, the stock market hasn’t reached the value it had on September 3rd 1929 until 1954, at least according to wiki, so the total return for the 18 years following early September 1929 (probably even from 1928) was negative.

    Of course, some banks failed during the same period too, but this was before FDIC. Also if you had all your money in US treasuries ahead of the crash of 29, surely you’d have come out way ahead.

    What you meant to say is only true for a period after 1950, but then some people say that what we had since 1950 is one large bull market with some corrections….

  10. 10
    ToughMoneyLove Says:

    The question is, if we taught personal finance to all high schoolers, who would teach them? Not many qualified folks out there. I am afraid that’s where they would put all the athletic coaches who need something to teach.

  11. 11
    Todd A Says:

    Just another case for active parental teaching. The school may teach your child about the revolutionary war of a country they’ll never visit, but, if there’s something you feel strongly about, you better impart it to your kids. No one at the school has the investment in your kids that you do.

  12. 12
    Double Says:

    Parents need to be better role models to their kids for handling finances. It would also be helpful for our youth if there was more teaching of finance.

  13. 13
    Nick Says:

    I’m a college freshman (19 yrs old) and I know a ton about finances, who taught me? Myself. No one cares more about your financial security than you.

  14. 14
    Mark Nelson Says:

    It would be interesting how the parents would rate in the survey.

    I agree we need to teach our high school kids more about finances. Our school requires all graduating students need one semester of personal finance. The class is taught by our business ed. teacher and I think she really does a great job. I really believe the class should be taught twice. Maybe during their sophomore year and then again as seniors.

    Repetition is the mother of learning

  15. 15
    Brian Says:

    It’s not in the Govt interests to teach financial ed. This way they can continue class seperation and make comments like “the rich keep getting richer and the poor continue to get poorer” Like Nick said “NO one cares more about your financial security than you.”

  16. 16
    Trav Says:

    Well, I won’t argue that kids are probably dumb, but surveys are even less intelligent; I probably would have failed that survey myself.

    “Only 48% of respondents knew that a credit card holder who only pays the minimum amount on monthly card balances will pay more in annual finance charges than a card holder who pays their balance in full.”

    I don’t know that either, unless I know more about the credit card. What about all those times I borrowed money on a 0% card, and bought dividend-paying stocks with it? (this is a trick of which nickel almost certainly approve.) I’d have lost money paying that balance in full.

    “Just 40% were aware that they could lose their health insurance if their parents become unemployed.”

    And I don’t know that, unless I know that my parents are out of touch with their COBRA rights.

    Surveys are *designed* for sensationalism, otherwise why would they get published?

  17. 17
    Dave Farquhar Says:

    I don’t think my generation fared much better (I’m in my mid 30s). I remember at least a couple conversations at work when I was a teenager, and I’d say something about money that would make my coworkers look at me like I was from another planet.

    I never learned much of anything about personal finance in school. Most of what I learned was from my parents.

    One bad example: In college algebra, we did a unit that involved a lot of interest-rate problems. But we didn’t calculate interest rates the way banks did, because that was too easy. The instructor actually said that, and kind of gleefully. We never solved a problem that illustrated the value of saving for retirement, paying off debt early, or the danger of spiraling into credit card debt. Heaven forbid we should actually learn anything useful in a math class.

    If our schools actually taught anything about money, we might have avoided the depression we’re in now.

  18. 18
    Jesse Says:

    There are, thankfully, some things being done to get personal finance curriculum into schools. Let’s just hope the main sponsors of that curriculum aren’t Visa, Mastercard, etc. They’re trying.

  19. 19
    Brian Says:

    I’m 38 and I didn’t learn any personal finance in school. I’ve thought that we should have it in school since I read Rich Dad Poor Dad. In it he tells about how the change to 401k plans from pension plans shoved uneducated people into investing.

    This is the reason the rich teach their kids about money.

    Thankfully I’ve taken an interest in learning on my own.

  20. 20
    Kimberley Says:

    I agree with the essence of this posts — but I also want to point out that financial acumen is incredibly difficult to achieve. I’m quite highly educated (which of course does not mean an automatic pass in terms of financial understandings), and I try to be savvy in terms of investments and deals etc. Recently I spent 4 hours trying to figure out why my credit card statements were giving me a finance charge when I didn’t think they should be. I had recently taken out a $9000 convenience check at 0% for 12 months and with the one time use fee waived. Almost like free money! HOWEVER, I forgot that my payments would be applied to the 0% balance FIRST, and the 7% balance SECOND. Soooooo, my partial payment of the balance (I had $2K of purchases) meant that the $9000 will end up costing me $9026 if I pay it all off now. That’s fine … but two points are interesting 1) how easy it is to forget or not understand the finer points of CC practices, and 2) it took me FOUR hours to understand and interpret correctly the legal language of HOW my average daily balance, etc., etc. were calculated, and make up a spreadsheet with the underlying formulas to replicate what the CC company was charging me. When I called my CC to have them tell me where I was going wrong, THEY COULD NOT TELL ME. Their people don’t know how to do the calculations! And they were unwilling to go through the 60 days worth of calculations and tell me what my daily balances were, etc. They asked me to trust them because the computer did it all. Fortunately, I finally did figure out where I had “gone wrong” but without the help I figured the CC company should offer, and only through really head-banging against the “legal explanation.”

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