Thursday, April 06, 2006

Does Your Teen Have Any Sense about Dollars?

Professor Lewis Mandell (SUNY-Buffalo) reports that on a financial literacy exam given to nearly 5,800 students spread around 37 states, an average score was 52% or barely in excess of half. Some examples of questions which created problems for the students: only 40% realized that loss of parent's job would leave them without health insurance; 23% recognized that interest on savings accounts potentially was taxable and a mere 14% (1 of 7) believed that stocks generally had better long-term returns than bonds. The scores, unimpressive as they were, remained consistent with results of similar tests given in 2004, 2002 and 2000. The tests were developed by the Merrill Lynch Foundation.

It is not surprising that many teens have limited awareness of personal finance, the advertising that see emphasizes "what to buy" not "how to make money" and many parents put few limits on what their teens can spend. Additionally, for a variety of reasons, K-12 programs have few if any financially-oriented classes. One organization which has done a very good job to help to fill this void is Junior Achievement; results like these show that the need for JA won't be disappearing anytime soon.


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