do people know enough economics to stay out of trouble?

Do People Know Enough Economics to Stay Out of Trouble?

Do People Know Enough Economics to Stay Out of Trouble?

The relationship of economic and financial education, financial literacy, financial attitudes and financial behavior

Do People Know Enough Economics to Stay Out of Trouble?

The relationship of economic and financial education, financial literacy, financial attitudes and financial behavior

Financial literacy measures ability to utilize economics for personal decision-making

Do People Know Enough Economics to Stay Out of Trouble?

The relationship of economic and financial education, financial literacy, financial attitudes and financial behavior

Financial literacy measures ability to utilize economics for personal decision-making

Component of 2006 National Economics Exam (NCLB)

The Impact of Financial Education Classes

• On Financial Literacy

The Impact of Financial Education Classes

• On Financial Literacy

• On Financial Attitudes

The Impact of Financial Education Classes

• On Financial Literacy

• On Financial Attitudes

• On Financial Behavior

Jump$tart National Survey• 4,075 students

• Coalition states oversampled –data weighted

• similar demographics (income chart)

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

<20k 20-39.9k 40-79.9k 80k+ D.K.

1997

2000

2002

2004

Little Evidence That Financial or Economic Education Improves Literacy

5151.5

5252.5

5353.5

5454.5

5555.5

56

EntireMoneyMgt.

PartMoneyMgt.

EntireEcon.

Part Econ. StockMarketGame

Mean Jump$tart score in 2004 52.3%

Little Evidence That Financial Education Improves Literacy

5151.5

5252.5

5353.5

5454.5

5555.5

56

EntireMoneyMgt.

PartMoneyMgt.

EntireEcon.

Part Econ. StockMarketGame

Except for the Stock Market

Game

Mean Jump$tart score in 2004 52.3%

Knowledge of Stocks

• Hector and Maria just had a baby. They received money as baby gifts and want to put it away for the baby’s education. Which of the following tends to have the highest growth over periods as long as 18 years?– a U.S. Govt.. savings bond

(45.9%)– a checking account (3.3%)– a savings account (33.6%)– * stocks (17.2%)

Knowledge of Taxes

• Andrew worked his way through college earning $15,000 per year. After graduation his first job pays $30,000. The total dollar amount Andrew will have to pay in Federal Income taxes in his new job will:– be lower than when he was in college (3.7%)– stay the same as when he was in college

(7.1%)– go up a little from when he was in college

(36.7%)– *double at least, from when he was in college

(52.5%)

While Financial Literacy Isn’t

Related to Thrift

40

42

44

46

48

50

52

54

56

VeryThrifty

SomewhatThrifty

In Between SeldomSaves

HardlyEver Saves

Thrift is Related to Financial Education – Positively

Financial Education

Somewhat or Very Thrifty

Financial Literacy Score

Semester MM 55.5% 53.5%

Part Semester MM 51.8% 52.7%

Semester Econ. 51.7% 53.0%

Part Semester Econ 50.8% 53.2%

Stock Mkt. Game 50.7% 55.8%

Thrift is Related to Financial Education – Positively and Negatively

Financial Education

Somewhat or Very Thrifty

Financial Literacy Score

Semester MM 55.5% 53.5%

Part Semester MM 51.8% 52.7%

Semester Econ. 51.7% 53.0%

Part Semester Econ 50.8% 53.2%

Stock Mkt. Game 50.7% 55.8%

What About Just-In-Time Education?

• Teach high motivation, timely subjects

What About Just-In-Time Education?

• Teach high motivation, timely subjects

• Study based on 11 Jump$tart questions relating to actual financial decisions made by students shows classes made no difference in specific knowledge

What About Future Behavior?

What About Future Behavior?

• “Plus 5” study contacted students up to 5 years after graduation.

What About Future Behavior?

• “Plus 5” study contacted students up to 5 years after graduation.

• Half had a highly-regarded course, half didn’t

What About Future Behavior?

• “Plus 5” study contacted students up to 5 years after graduation.

• Half had a highly-regarded MM course, half didn’t

• Paid for Participation

Financial Literacy Scores Not Improved by Taking a Personal Finance Class

Took

Course

+ Five

Yes 68.7%

No 69.9%

These Results are Supported by the Jump$tart Surveys

Took

Course

+ Five 2000

Jumpstart

2002 Jumpstart

2004 Jumpstart

Yes 68.7% 51.4% 48.2% 53.5%

No 69.9% 52.0% 50.5% 52.0%

Does Effect of Course on Thrift Persevere?(From + Five Study)

Thrifitness No Course Course Score

Very Thrifty 20.0 28.2 66.1

Somewhat Thrifty 40.0 28.2 75.1

In Between 12.5 12.8 61.4

Somewhat Spending-Oriented

20.0 20.5 66.4

Very Spending-Oriented

7.5 10.3 73.9

Relationship of Financial Literacy Course to Behavior

No Course

Course

Always pays off card balances 66.7%

No late card fees

Never bounces a check

Balances checkbook

Relationship of Financial Literacy Course to Behavior

No Course

Course

Always pays off card balances 66.7% 67.7%

No late card fees

Never bounces a check

Balances checkbook

Relationship of Financial Literacy Course to Behavior

No Course

Course

Always pays off card balances 66.7% 67.7%

No late card fees 75.0%

Never bounces a check

Balances checkbook

Relationship of Financial Literacy Course to Behavior

No Course

Course

Always pays off card balances 66.7% 67.7%

No late card fees 75.0% 84.8%

Never bounces a check

Balances checkbook

Relationship of Financial Literacy Course to Behavior

No Course

Course

Always pays off card balances 66.7% 67.7%

No late card fees 75.0% 84.8%

Never bounces a check 73.7%

Balances checkbook

Relationship of Financial Literacy Course to Behavior

No Course

Course

Always pays off card balances 66.7% 67.7%

No late card fees 75.0% 84.8%

Never bounces a check 73.7% 64.7%

Balances checkbook

Relationship of Financial Literacy Course to Behavior

No Course

Course

Always pays off card balances 66.7% 67.7%

No late card fees 75.0% 84.8%

Never bounces a check 73.7% 64.7%

Balances checkbook 65.0%

Relationship of Financial Literacy Course to Behavior

No Course

Course

Always pays off card balances 66.7% 67.7%

No late card fees 75.0% 84.8%

Never bounces a check 73.7% 64.7%

Balances checkbook 65.0% 76.7%

Relationship of Financial Literacy to Behavior

No Course

Course Below

Average

Above

Average

Always pays off card balances

66.7% 67.7% 61.3%

No late card fees 75.0% 84.8%

Never bounces a check

73.7% 64.7%

Balances checkbook

65.0% 76.7%

Relationship of Financial Literacy to Behavior

No Course

Course Below

Average

Above

Average

Always pays off card balances

66.7% 67.7% 61.3% 72.2%

No late card fees 75.0% 84.8%

Never bounces a check

73.7% 64.7%

Balances checkbook

65.0% 76.7%

Relationship of Financial Literacy to Behavior

No Course

Course Below

Average

Above

Average

Always pays off card balances

66.7% 67.7% 61.3% 72.2%

No late card fees 75.0% 84.8% 75.8%

Never bounces a check

73.7% 64.7%

Balances checkbook

65.0% 76.7%

Relationship of Financial Literacy to Behavior

No Course

Course Below

Average

Above

Average

Always pays off card balances

66.7% 67.7% 61.3% 72.2%

No late card fees 75.0% 84.8% 75.8% 83.3%

Never bounces a check

73.7% 64.7%

Balances checkbook

65.0% 76.7%

Relationship of Financial Literacy to Behavior

No Course

Course Below

Average

Above

Average

Always pays off card balances

66.7% 67.7% 61.3% 72.2%

No late card fees 75.0% 84.8% 75.8% 83.3%

Never bounces a check

73.7% 64.7% 66.7%

Balances checkbook

65.0% 76.7%

Relationship of Financial Literacy to Behavior

No Course

Course Below

Average

Above

Average

Always pays off card balances

66.7% 67.7% 61.3% 72.2%

No late card fees 75.0% 84.8% 75.8% 83.3%

Never bounces a check

73.7% 64.7% 66.7% 71.1%

Balances checkbook

65.0% 76.7%

Relationship of Financial Literacy to Behavior

No Course

Course Below

Average

Above

Average

Always pays off card balances

66.7% 67.7% 61.3% 72.2%

No late card fees 75.0% 84.8% 75.8% 83.3%

Never bounces a check

73.7% 64.7% 66.7% 71.1%

Balances checkbook

65.0% 76.7% 66.7%

Relationship of Financial Literacy to Behavior

No Course

Course Below

Average

Above

Average

Always pays off card balances

66.7% 67.7% 61.3% 72.2%

No late card fees 75.0% 84.8% 75.8% 83.3%

Never bounces a check

73.7% 64.7% 66.7% 71.1%

Balances checkbook

65.0% 76.7% 66.7% 73.2%

Conclusions

• Classes little help for financial literacy– May be improving – too early to tell

• Immediate effect of classes on thrift may not persevere

• Just-in-Time education focus doesn’t help• Classes may impact some behavior• Interactivity promotes literacy• Literacy and behavior appear related (although

causation is a question)

Is it an Act of God?

49. Which of the following do you feel is the greatest cause of serious financial difficulty, where families can’t pay their bills?a) Bad luck such as unexpected illness or job lossb) Not enough savingsc) Buying too much on creditd) Not following a financial plane) Not being able to earn enough money

Are There Few Consequences?

50.How bad do you think it is for families who don’t have enough money to pay their bills?

a)Not so bad, a lot of families go through thisb)Pretty bad, it is painful to experiencec) Very bad, it is one of the worst things that

can happen to a family

Are They Pleased With the Safety Nets?

51. What do you think happens to older people when they retire if they haven’t saved much money and don’t have a good pension from their former jobs?a) They live pretty well on Social Security b) They get by on Social Security by keeping their expenses downc) They find it tough to live on Social Security

Do People Know Enough Economics to Stay Out of Trouble?