June 28, 2011
Hubris Hampers Education Efforts
Most people think they’re above average when it comes to financial knowledge. And it’s not easy to educate people who think they know more than they actually do.
But hubris – or something like it – is what financial educators are up against, indicates research by professors Annamaria Lusardi at the George Washington School of Business and Olivia Mitchell at the University of Pennsylvania’s Wharton School. Their paper used data from 1,200 respondents to a survey they conducted for the Investor Education Foundation or FINRA, the self-regulatory agency for the securities industry. It may be the most comprehensive study on Americans’ financial literacy.
Seventy percent of the survey’s respondents believe they know more about basic financial concepts than most other people. But they scored poorly on the survey’s three rudimentary financial literacy questions. One-third to one-half of them answered the questions incorrectly or indicated they didn’t know the answers.
The results “paint a troubling picture of the current state of financial knowledge in the United States,” the authors said.
Further, this low level of knowledge, when combined with overconfidence about that knowledge, does not bode well for attempts to educate people about money and their personal finances.
Before I provide more detail about Lusardi and Mitchell’s findings, take the quiz yourself. Here are the questions1:
May 26, 2011
Two Steps Back for Financial Education
Consider these grim outcomes for financial educators:
- One study found that the seniors who had the least financial knowledge were most confident about their knowledge;
- The most successful educational tools – stock market games – send the message it’s okay to gamble;
- When Illinois required consumers to attend a workshop for certain types of mortgages, homebuyers avoided those mortgages;
- Scores for national financial literacy tests administered to high schools by the JumpStart program declined between 1997 and 2008;
- Soldiers exhibited worse budgeting behaviors after taking a financial course than before.
In the past decade, foundations, governments, and non-profits have poured millions into financial literacy efforts in grade schools through college and among low-income neighborhoods and specialized groups, such as homebuyers and the military.Learn More
May 11, 2011
High School Influences Life Knowledge
It’s been well-established that most people have low levels of financial literacy and struggle to manage and plan their personal finances. Now two Wisconsin researchers have taken the conversation to the next level by trying to explain why.
According to their study, featured in a webinar posted online today, the financial literacy of people entering retirement is significantly determined by high school IQ level or by whether the individual took high-level math classes in school.
University of Wisconsin professors Pamela Herd and Karen Holden arrived at this finding by analyzing 6,000 individuals from a unique longitudinal data set of people who graduated from Wisconsin high schools in 1957 – and were in their mid-60s at the time of the study. …Learn More