Teaching Kids About Money, What We're Up Against

How we teach kids about money is emerging as a national obsession, which has in recent years spawned dozens of think tanks, research groups, academic studies, government initiatives and blogs (like this one). But for all of our good intentions, we've not been able to move the needle on financial know-how.

The JumpStart Coalition for Personal Financial Literacy has been testing high school students every two years since 1997. The average test score in every case has been a failing one -- starting with an average score of 57.3% in 1997 and continuing with 51.9% in 2000, 50.2% in 2002, 52.3% in 2004, 52.4% in 2006 and, almost incredibly, a record low 48.3% in 2008.

Whatever we're doing, it's just not getting through. That has prompted the Obama administration to switch gears in its approach to financial education. One problem clearly is that most teachers are unqualified to offer instruction in personal finance. It's also possible that the test itself is lacking in some way. We'll know more about that next year; testing for the 2010 survey has been outsourced to Learning Point Associates, which has an updated test that JumpStart hopes will "take the research project to new levels."

There is some good news in that college students, answering the same 31-question exam that high school students failed in such sweeping numbers, preformed much better in the 2008 survey (the first time college students were included). The average score for college kids was 62.2%; so they didn't exactly ace the thing, but scores improved with each additional year of higher education.

It seems that American college graduates are close to being financially literate and probably will become so with more life experience. The bad news is that just 27% of us graduate from college. The rest are likely to lack the skills needed to make smart financial decisions.

Based on the latest survey, here's a sampling of what we're up against:

• Stocks or bonds Only 16.8% of high school seniors and 19.2% of college students feel that stocks are likely to have higher average returns than savings bonds, savings accounts and checking accounts over an 18 year period.

• Taxes due Just 27.3% of high school seniors and 39% of college students realize that interest on a savings account is taxable in most cases.

• Health insurance Only 40% of high school seniors realize that their own medical insurance could stop if their parents become unemployed. (Nearly 70% of college students got this right.)

Consistently poor showings in the area of personal finance -- despite redoubled efforts to teach it -- may suggest that a lot of this stuff is simply unlearnable for many young Americans. Yet giving up isn't an option. The social safety net is growing weaker, not stronger; our kids will have to be able to make smart decisions about money -- or they'll end up with none to worry about.

If you have a question about kids and money, I'll find the answer. Email me at dankadlec@dankadlec.com.

Photo courtesy Flickr user David Paul Ohmer