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)

Little Evidence That Financial or Economic Education Improves Literacy Mean Jump$tart score in %

Little Evidence That Financial Education Improves Literacy Except for the Stock Market Game Mean Jump$tart score in %

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

Thrift is Related to Financial Education – Positively Financial Education Somewhat or Very Thrifty Financial Literacy Score Semester MM55.5%53.5% Part Semester MM51.8%52.7% Semester Econ.51.7%53.0% Part Semester Econ50.8%53.2% Stock Mkt. Game50.7%55.8%

Thrift is Related to Financial Education – Positively and Negatively Financial Education Somewhat or Very Thrifty Financial Literacy Score Semester MM55.5%53.5% Part Semester MM51.8%52.7% Semester Econ.51.7%53.0% Part Semester Econ50.8%53.2% Stock Mkt. Game50.7%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?

“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 Yes68.7% No69.9%

These Results are Supported by the Jump$tart Surveys Took Course + Five2000 Jumpstart 2002 Jumpstart 2004 Jumpstart Yes68.7%51.4%48.2%53.5% No69.9%52.0%50.5%52.0%

Does Effect of Course on Thrift Persevere? (From + Five Study) ThrifitnessNo CourseCourseScore Very Thrifty Somewhat Thrifty In Between Somewhat Spending- Oriented Very Spending- Oriented

Relationship of Financial Literacy Course to Behavior No Course Course Always pays off card balances66.7% No late card fees Never bounces a check Balances checkbook

Relationship of Financial Literacy Course to Behavior No Course Course Always pays off card balances66.7%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 balances66.7%67.7% No late card fees75.0% Never bounces a check Balances checkbook

Relationship of Financial Literacy Course to Behavior No Course Course Always pays off card balances66.7%67.7% No late card fees75.0%84.8% Never bounces a check Balances checkbook

Relationship of Financial Literacy Course to Behavior No Course Course Always pays off card balances66.7%67.7% No late card fees75.0%84.8% Never bounces a check73.7% Balances checkbook

Relationship of Financial Literacy Course to Behavior No Course Course Always pays off card balances66.7%67.7% No late card fees75.0%84.8% Never bounces a check73.7%64.7% Balances checkbook

Relationship of Financial Literacy Course to Behavior No Course Course Always pays off card balances66.7%67.7% No late card fees75.0%84.8% Never bounces a check73.7%64.7% Balances checkbook65.0%

Relationship of Financial Literacy Course to Behavior No Course Course Always pays off card balances66.7%67.7% No late card fees75.0%84.8% Never bounces a check73.7%64.7% Balances checkbook65.0%76.7%

Relationship of Financial Literacy to Behavior No Course CourseBelow Average Above Average Always pays off card balances 66.7%67.7%61.3% No late card fees75.0%84.8% Never bounces a check 73.7%64.7% Balances checkbook 65.0%76.7%

Relationship of Financial Literacy to Behavior No Course CourseBelow Average Above Average Always pays off card balances 66.7%67.7%61.3%72.2% No late card fees75.0%84.8% Never bounces a check 73.7%64.7% Balances checkbook 65.0%76.7%

Relationship of Financial Literacy to Behavior No Course CourseBelow Average Above Average Always pays off card balances 66.7%67.7%61.3%72.2% No late card fees75.0%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 CourseBelow Average Above Average Always pays off card balances 66.7%67.7%61.3%72.2% No late card fees75.0%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 CourseBelow Average Above Average Always pays off card balances 66.7%67.7%61.3%72.2% No late card fees75.0%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 CourseBelow Average Above Average Always pays off card balances 66.7%67.7%61.3%72.2% No late card fees75.0%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 CourseBelow Average Above Average Always pays off card balances 66.7%67.7%61.3%72.2% No late card fees75.0%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 CourseBelow Average Above Average Always pays off card balances 66.7%67.7%61.3%72.2% No late card fees75.0%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 loss b) Not enough savings c) Buying too much on credit d) Not following a financial plan e) 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 this b)Pretty bad, it is painful to experience c) 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 down c) They find it tough to live on Social Security

Do People Know Enough Economics to Stay Out of Trouble?