In recognition of Congress’ designation of April as Financial Literacy Month, this week’s Stat of the Week focuses on the state of financial education in American schools. Policymakers and experts stressing the need for increased financial literacy often cite gloomy statistics like the personal savings rate for Americans, which was -1 percent for 2006—the lowest it has been since the Depression. Additional evidence suggests that high school students do not know much about personal finance.
The Jump$tart Coalition, a Washington, D.C.-based nonprofit organization that seeks to improve the personal financial literacy of students, conducts a biannual survey of 12th grade students’ financial knowledge. Topics assessed include credit cards, insurance, retirement funds, and savings accounts. Nearly 6,000 students from 37 states participated in the 2005-2006 survey. The average student scored 52.4 percent. Since the first survey in 1997, scores have remained in the 50-60 percent range.
States have been increasingly active in their efforts to promote financial literacy among students. The National Council on Economic Education (NCEE), which was awarded a grant by the U.S. Department of Education to advance financial literacy among all students, found that an increasing number of states have standards that include personal finance, as well as course and test requirements.
On the surface, education seems like a good way to try to improve the financial habits of Americans, but the relationship between knowledge and behavior is extremely complex—especially when it comes to money. In a recent report, “Financial Literacy Strategies: Where Do We Go From Here?” Robert I. Lerman and Elizabeth Bell note that while Americans might be getting more basic financial information these days, educational programs may not be giving participants the skills to apply the information to their individual circumstances in order to make good financial decisions. Some in the educational gaming industry wonder if video games could help students learn more about making good financial decisions. Education Week reported that South Korea may be distributing a financial literacy video game called Goonzu this year for students in grades K-5.
The chart below shows trends in personal finance education. Almost half of the states require financial literacy standards to be implemented, but fewer states require students to take courses or tests.
Source: National Council on Economic Education (NCEE), 2005