Texas high school students still lack dollar sense, study says
April 26, 2008
And even though a new state law went into effect two years ago to require high-school students to take personal finance before graduation, Texas high-school seniors still answered only 49 percent of the questions correctly on the test sponsored by the JumpStart Coalition, a group of more than 200 personal-finance partners focused on financial literacy for children.
Written by Teresa McUsic, Fort Worth Star-Telegram
Texas high-school students scored the highest in the nation in a financial-literacy test -- but they still failed the test.
"Somehow, somewhere, we're missing the boat," said Beth Woehler, executive director of the Institute of Financial Literacy in Houston.
And even though a new state law went into effect two years ago to require high-school students to take personal finance before graduation, Texas high-school seniors still answered only 49 percent of the questions correctly on the test sponsored by the JumpStart Coalition, a group of more than 200 personal-finance partners focused on financial literacy for children.
This is the first time that individual state results were sliced out of the test, which has been given nationally to nearly 7,000 students every other year.
Nationally, students fared slightly worse, scoring 48 percent on the 31-question test, which covers issues such as credit-card fees, mortgages, taxes, insurance and paychecks.
The national score was the lowest since the test began in 2004, said Laura Levine, executive director of JumpStart.
"We attribute it to the economic condition of the country," Levine said. "Students are very influenced by what's going on around them."
For example, one question discussed the best place to invest your money over the next six years, with the stock market the correct answer, she said.
"But students are aware that the stock market is not doing well," she said. "Their perception is, that couldn't be the right answer."
Looking to parents
Many states including Texas are taking action to fight personal-finance illiteracy through laws that promote such education in the public schools, Levine said. Three states require at least one high-school semester dedicated to personal finance, and 15 states, including Texas, require personal-finance instruction in high-school subject matter.
Texas legislation passed in 2005 required high-school students to take personal finance before graduation, beginning in 2006. A personal-financial component is now incorporated into the economics credit of public high schools.
But parents shouldn't rely on school curriculum to teach their children important points of personal finance, said Cynthia Nevels, executive director of Jr. Finance, a Dallas-based financial-literacy provider that offers classes and summer camps to children.
"Research will tell you that the primary means for kids to learn to manage money is in the home," she said. "They learn what they see."
But few parents today teach money skills to their children, Nevels said.
"All kids learn to do is spend," she said.
College level still dismal
Personal-finance knowledge apparently doesn't get much better with college students, according to the JumpStart test. This year, for the first time, college students across the country took the test.
Their scores weren't much better, but they did increase as the student grew older. College freshmen received a 59 percent score, while college seniors correctly answered 65 percent of the questions.
At both high-school and college levels, Anglo students tended to fare slightly better than Hispanic and African-American students on the test.
If you'd like to test your own student, go to www.JumpStartCoalition.org and look under downloads.
You may be surprised by how your student answers.
Scores by subject area on a recent personal-finance test sponsored by the JumpStart Coalition:
59% Income
38% Money management
44% Savings
51% Spending
44% Debt
Parents are still the most influential teachers of personal finance to children, according to several studies. Here's what the experts recommend you cover:
Wants versus needs. A Capital One survey showed that just half of parents have ever had this discussion with their children. The easy availability of credit through credit cards makes understanding this difference vital to everyday spending habits.
Savings. Open a savings account or Roth IRA in your child's name. Introducing the concept of saving money to a child is an important way to counter the influence of advertising and peer pressure for spending. If possible, provide a matching dollar amount for every dollar your child saves to introduce the concept of corporate matching funds in retirement plans.
Budgeting. Give your child a set amount to use to throw a birthday party or family picnic or to shop for back-to-school needs. Show the child how to look for the best prices. Tell the child he can keep what he doesn't spend.
Be a good role model. Demonstrate to your child that you are setting goals and living within your means. Be honest about costs of living and money mistakes you make.
Reinforce importance of continuing education and training. Let them see the link between earnings and higher education. According to a 2002 report by the U.S. Census Bureau, average annual earnings from 1997 to 1999 ranged from $18,900 for high school dropouts to $25,900 for high-school graduates; $45,400 for college graduates; and $99,300 for workers with professional degrees such as doctors, dentists and lawyers. The study can be found at www.census.gov/prod/2002pubs/p23%2D210.pdf.
Use available resources. Financial-education classes for kids and online resource materials can reinforce learning. For local summer camps and classes, check out www.jrfinance.com. For online courses and resources for kids, go to www.ffltx.org, www.OrangeKids.com or www.HandsOnBanking.org.
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