|Majority of Teens, Ages 13-18, Agree that Money Management Should Be a High School Requirement|
“he is a man with a lot of money.”
While youth are commonly looked to as the beacon of the future, today's youth may be destined to repeat the previous generation's missteps in money management unless they get help, according to a recent survey(a) by the Charles Schwab Foundation and Boys & Girls Clubs of America (BGCA). Teens' uncertain grasp of basic financial concepts underscores a dramatic need for more personal finance education -- not just during April, which is National Financial Literacy Month -- but year-round.
Commissioned by the Charles Schwab Foundation, the study probed teen definitions of financial literacy, their understanding of important concepts in money management, and their beliefs about who should bear responsibility for teaching them money management. According to Carrie Schwab Pomerantz, president of the Charles Schwab Foundation and the daughter of company founder and CEO Charles R. Schwab, "These findings are a call-to-action for parents, government and the private sector to do more to help today's teens become financially savvy adults who can help reverse the course of poor saving and debt management habits in the U.S."
For instance, only 17 percent of survey respondents said they were very or extremely knowledgeable about how to manage debt, a finding that's notable in light of the fact that the nation's bankruptcy and household debt levels have climbed to all-time highs. Further:
-- Fewer than a third (28 percent) are extremely or very knowledgeable about creating a budget;
-- Only a little more than a third (36 percent) are extremely or very knowledgeable about how to open a savings account;
-- And only 10 percent understand the power of compounding, one of the most fundamental concepts in investing.
When asked to define the term financial literacy in their own words, the majority of respondents (79 percent) could not. Several answers to this open- ended question, in fact, further underscore the urgency for more financial education:
-- "I think it is a month when a person would read and buy books."
-- "I feel it means money for learning to read."
-- "I think it's advanced English."
The survey is an outgrowth of the Money Matters: Make It Count program, launched last year by Schwab and BGCA, to promote financial literacy among teens. The program aims to reach 36,000 young people, primarily from disadvantaged circumstances, during the next two years.
"As our world becomes increasingly complex, we need to do a better job of teaching the next generation the basics of personal finance so that they are prepared to handle the pressures that await them," said Schwab Pomerantz. "It's disturbing that the areas teens seem least knowledgeable about are managing debt and creating a budget. These topics are the cornerstone of the Money Matters program, which we designed to teach good financial habits at a young age and help teens make wise financial decisions as they move into adulthood."
The survey polled a national sample of teens as well as a separate sample of teen members of Boys & Girls Clubs across the country(b). The Boys & Girls Clubs sample included teens who had completed the Money Matters program, as well as those who had not, and shows that the program is working.
"We are very encouraged by the fact that teens who have experienced Money Matters demonstrate a firmer understanding of money management," said Judy J. Pickens, senior vice president of program services, BGCA. "The survey findings reinforce our belief that with the right guidance, teens can get a great head start toward a more financially sound future."
Comparison of National Teen Sample with Money Matters Teen Sample
-- Approximately one-third (31 percent) of Money Matters teens say they are extremely or very knowledgeable about how to manage debt versus 17 percent of the national teen sample.
-- Twenty-eight percent of the national teen sample say they are very or extremely knowledgeable about how to create a budget versus 40 percent of Money Matters teens.
-- Thirty-six percent of the national teen sample claim to be extremely or very knowledge about how to open a savings account compared to 50 percent of the Money Matters teens.
-- Only 25 percent of Money Matters teens say they are not very or not at all knowledgeable about how to balance a checkbook versus 35 percent of the national teen sample.
Personal Finance in the Home and School
More than two-thirds (67 percent) of teens believe their parents or guardians should be most responsible for teaching them about money and how to manage it. But while most teens rely on their parents as their primary source of financial guidance, 13 percent also look to their teachers for coaching on money management.
Eighty percent of teens ages 13-18 believe the basics of money management should be a requirement in high school. Yet despite this overwhelming interest from teens in personal finance education, only seven states -- Alabama, Georgia, Idaho, Illinois, Kentucky, New York and Utah -- currently mandate that students take a course on personal finance in order to graduate high school(c).
"We find it alarming that only 33 percent of teens surveyed said they had received any money management education in school, particularly in light of research from Stanford University nearly a decade ago that showed that requiring high school students to take a personal finance course leads them to save more later in life," said Schwab Pomerantz, "And while the federal government is beginning to address the problem with the establishment of the Financial Literacy and Education Commission, we believe organizations like ours can also play an integral part in preparing the next generation for the financial challenges they may face later in life."
Teens, for one, seem to think that Schwab and Boys & Girls Clubs of America are on the right track.
Nearly half of teens surveyed (46 percent) feel a class or workshop in or out of school would best help students learn the most about money management. Thirty-six percent of teens indicate a conversation about money with their parents or guardians would be most beneficial.
He's Hired! Donald Trump Tops Teens' List of Financially Literate People in America; Alan Greenspan is at the Bottom
Donald Trump need not worry about hearing those two words contestants on "The Apprentice" have come to fear. The majority of teens (41 percent) are more inclined to tell Mr. Trump "you're hired" after declaring him the most financially literate person in America. Oprah Winfrey, with 25 percent of the votes, ranked second.
Only nine percent of teens selected Federal Reserve Board Chairman Alan Greenspan as the most financially literate person in America. In fact, when asked to identify Alan Greenspan, noteworthy responses included: "I think he's some dude in D.C.," "he owns something big," and "he is a man with a lot of money." Of note, 21 percent of teens who had participated in the Money Matters program answered this question correctly versus seven percent in the national teen sample.
About The Charles Schwab Foundation
Funded by The Charles Schwab Corporation (NYSE: SCH; Nasdaq), the Charles Schwab Foundation is committed to giving back to the community by supporting employee-selected causes and fostering financial literacy through funding, involvement and expertise.
The Charles Schwab Corporation, through its operating subsidiaries, provides securities brokerage and financial services to individual investors and the independent investment advisors who work with them. With over 7 million individual investor accounts and more than $1 trillion in client assets, The Charles Schwab Corporation is one of the nation's largest financial services firms. Its subsidiary Charles Schwab & Co., Inc. (member SIPC) provides a complete range of investment services and products, including an extensive selection of mutual funds; financial planning and investment advice; retirement plans; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent fee- based investment advisors through its Schwab Institutional division. Its subsidiary Charles Schwab Bank (member FDIC) provides banking and mortgage services and products. The corporation's other operating subsidiaries include U.S. Trust Corporation (member FDIC) and CyberTrader(R), Inc. (member SIPC). These companies' Web sites can be reached at www.schwab.com, www.schwabbank.com, www.ustrust.com, and www.cybertrader.com. (0405-7371)
Brokerage products: Not FDIC insured. No Bank Guarantee. May Lose Value.
About Boys & Girls Clubs of America
Boys & Girls Clubs of America (www.bgca.org) comprises a national network of some 3,400 neighborhood-based facilities annually serving some 4 million young people, primarily from disadvantaged circumstances. Known as "The Positive Place for Kids," the Clubs provide guidance- oriented character development programs on a daily basis for children and teens, 6-18 years old, conducted by a full-time professional staff. Key Boys & Girls Club programs emphasize character and leadership development, education and career enhancement, health and life skills, the arts, sports, fitness and recreation.
(a) The survey was conducted by Leflein Associates, Inc. using Computer Assisted Telephone Interviewing 3/9/05 through 3/13/05. Telephone interviews were completed among a national listed sample of 500 teens age 13 to 18, 250 males and 250 females. Quotas were used by region to represent the actual distribution of the 24 million teens that are residing in the U.S. as reported by the U.S. census. In addition, half the sample consisted of 13-15 year olds and half were 16-18 years of age. This study has a margin or error of plus or minus 4% at the 95% confidence level; while the margin of error for subgroups is higher.
(b) Boys & Girls Clubs of America's teen survey was conducted online from March 8-18, 2005. The survey was completed by 1,389 Boys & Girls Club members ages 13-18, including 280 teen members who had participated in the Money Matters program.
(c) 2004 survey by the private National Council on Economic Education