Facts & Figures
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Money management is a life skill that unfortunately doesn’t come with a manual. If it did, and assuming everyone followed the rules, we’d all have flawless credit and zero debt. But the average credit score in the U.S. — 668, which is considered “fair” by the most common scoring models — reflects a shortage of fiscal prowess in our nation. Nearly one in four adults, for instance, confess to not paying their bills on time. And three-quarters of all college students with credit cards admit to being unaware of late-payment fees.
Much of the ignorance begins to breed during childhood. The strength of our money-management skills as adults depends heavily on our financial role models growing up. According to a study by T. Rowe Price, “Seventy-two percent of parents experience at least some reluctance to talk to their kids about financial matters,” indicating the proportion of us who are bound to lack the know-how later in life.
Adults in our classrooms are no better, either. Fewer than one in five teachers feel sufficiently competent to teach a course on personal finance, partly explaining why only 17 states require high school students to complete such a class and an underwhelming five mandate it for graduation. But the courses seem to work. The National Endowment for Financial Education found that students who were required to learn about money management at school became better adult consumers with higher credit scores, a greater tendency to save money and a lower likelihood of compulsive spending.
When it comes to financial literacy, you’re never really done learning.
April is Financial Literacy Month, and studies still paint a grim picture about how poorly educated Americans are when it comes to managing our money. In the first large-scale international study of 15-year-old students’ financial literacy skills, released last summer, the U.S. ranked at best eighth and at worst, 12th, out of 18 countries participating.
Adults haven’t fared any better. In a Retirement Income Literacy Survey conducted for The American College of Financial Services last year, 80 percent of the respondents received scores of 60 or lower on financial questions about retirement. Just 20 percent received what amounted to a passing grade
Financial literacy educators say there’s a way to buck the trend, and it isn’t all about starting earlier. “We’re stepping up our game in other parts of people’s lives,” said Ted Beck, president and chief executive of the National Endowment for Financial Education. “We’re trying to make financial literacy more of a continuous education.”
Historically, high school is where the bulk of financial literacy programs have targeted their efforts. But studies have found that the retention rate on financial lessons learned is two years at best, said Beck—a track record supported by such financial literacy test results. A comprehensive personal finance education in high school may not fully prepare someone years later to buy a home, understand his workplace benefits or save for retirement, especially with a rapidly shifting array of financial products and tools in the mix.