I’m fairly certain I’ve been obsessed with finances since I was able to talk. My father used to “call” me on my pretend phone and ask me if I had any stock market advice for him, and my programmed preschooler response was “Buy low, sell high!”. In middle school I saved my allowance for months. I was saving and saving, and I knew just what I wanted to do with my funds… buy a cash register! Totally normal for a ten year-old, right? My parents were very concerned that I learn how to manage my money, and they put a lot of time and effort into making me listen and getting me interested. But more often than not, this is not the case.
Annamaria Lusardi, the director of the Global Financial Literacy Excellence Center (GFLEC) at the George Washington University School of Business (and all around badass crusader for better financial education) recently coauthored a study on how financially literate women are and the results were shocking. The study asked three basic financial questions, and only 22% of women answered three out of three correctly. To be fair, men also scored a failing grade with only 38% answering all questions correctly, but either way you slice it, this highlights a larger issue of how we can better educate Americans to ensure their financial stability.
See how you do with these questions posed by GFLEC (scroll to the bottom of the page for answers):
1) “Suppose you had $100 in a savings account and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if you left the money to grow?”
- A) More than $102
- B) Exactly $102
- C) Less than $102
- D) Don’t know
2) “Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After 1 year, with the money in this account, would you be able to buy…”
- A) More than today
- B) Exactly the same as today
- C) Less than today
- D) Don’t know
3) “Do you think the following statement is true or false? Buying a single company stock usually provides a safer return than a stock mutual fund.”
- A) True
- B) False
- C) Don’t know
As Lusardi states in an interview with Kiplinger, “If financial literacy isn’t taught in school, you acquire it through experience and through others around you — for example, your parents or colleagues. Women are at a disadvantage if parents don’t talk to girls about finance in the same way they talk to boys. And women are more likely to be surrounded by other women at work or socially, so there’s less opportunity to learn.” Personally, I lucked out to be in a family that wanted to talk about finances, but we shouldn’t lay all of this burden on parents. We need our education system, and even our corporations to take responsibility for educating children and adults alike.
So where do we start? If you are a parent or educator looking for resources to help educate the children in your life, a good place to start is MyMoney.gov. MyMoney is sponsored by the U.S. Finance Literacy & Education Commission and has good basic budgeting information as well as links to finance games for children. Additional, there are many not-for-profit organizations dedicated to making things better for the next generation. Operation HOPE is a prime example of an organization reaching out to provide financial education to all those seeking more information.
All of this information can be daunting, and if you’re already overwhelmed by dealing with your own finances, the last thing you may want to do is speak to others about theirs. Ultimately, the failure seems to be with the lack of financial education that is happening in schools nationwide. In my opinion, there should be no question of whether schools teach money management skills, but it should be a requirement starting at an elementary level. Let’s hope a change is coming in order to make the next generation the most financially savvy generation to date.
Answers: 1, A; 2, C; 3, B.