Wouldn’t it be nice if all Americans were more financially literate?  We’d make better financial decisions, have less debt, save more and be better prepared for retirement.  We may even have avoided much of our current economic plight by not getting as far into debt or by getting into mortgages that we couldn’t afford.

Sadly, the problem is that parents, the expected and trusted source of that learning often don’t have the skills to pass it on to their children.  That’s because they didn’t learn from their parents.  In fact, a survey by the Networks Financial Institute found that less than 30 percent of American adults view their financial knowledge as very good (http://www.networksfinancialinstitute.org/thoughtleadership/publications/Pages/default.aspx).  It gets worse.  Another study by Dartmouth Prof. Annamaria Lusardi (http://www.dartmouth.edu/~alusardi/policy.html) found that only 18 percent of 1,700 adults in their early 50s could correctly answer a question about compound interest.  And another survey for found that parents would rather talk to their kids about the birds and the bees rather than money management (http://www.businesswire.com/portal/site/schwab/index.jsp?ndmViewId=news_view&ndmConfigId=1010973&newsId=20080326005384&newsLang=en). 

Money management has a lot to do with our personal value systems and sense of responsibility.  And teaching some of these concepts is more complicated than mathematics, and involves understanding people, their motivations and their psychology.  Understanding money means understanding that it is one of the most powerful motivators in life.

So why not teach the subject in schools so that we can all eventually become smarter?  It is true that the number of states requiring some sort of financial literacy instruction is growing.  The problem for the schools is that they are already facing time and budget pressures to deliver on current offerings and many teachers do not feel they have the financial savvy to teach such a course.  Most important, consistent academic standards for teaching such a course do not currently exist. 

Learning these skills early is important because adults with financial skills and knowledge are better at keeping more of the money that they earn through better saving, retirement planning and avoidance of debt problems.  We are also living in a time in which financial products are both more complicated and more available than ever before. 

Educating high school seniors or incoming freshmen about money and financial topics would capture the current generation at a very teachable moment.  Not only are they just gaining their independence and being sent off into a world with more complex financial products and choices, they are also reaching a time in their lives when they will be asked to make important financial decisions that can follow them for the rest of their lives – and most are not aware of the financial impact.  For example, they are being provided with credit cards at a time when few are aware of the impact of high interest rates on outstanding balances or of the consequences of failing to make timely payments on their own credit history.  Yet five out of six college undergraduates have credit cards and about half of those carry more than four credit cards.  In addition, student debt is rising faster than starting salaries for new graduates.  According to the Project on Student Debt (http://projectonstudentdebt.org/newsroom.php?type=project), the average student debt of the Class of 2007 was $20,098, up six percent from the previous year.  Also, student loan default rates are rising rapidly and are expected to reach 6.9 percent for fiscal 2007.

Not only are we not providing young adults with the appropriate skills to navigate their financial lives, but they are leaving school at a time when jobs are difficult to obtain, potentially hobbled with debt loads that will be difficult to overcome.  The good news is that any number of surveys indicate that today’s students recognize the fact that they need to acquire money skills. 

Government also recognizes the problem. More and more states are requiring some sort of financial literacy education at the high school level.  The challenge is to develop academic standards and agreement among educators on what is necessary to include in such courses along with some training for the teachers. 

Thanks to the internet, other sources are becoming available.  For example, the Financial Industry Regulatory Authority’s site delivers basic information and has a section on saving for college (http://www.finra.org/Investors/SmartInvesting/SmartSavingForCollege/).  And the AARP has a new site called LifeTuner (http://www.lifetuner.org/) to provide information about important financial decisions.

However, reaching the generation going to high school and college today requires a more targeted approach.  MoneyU®,(www.moneyu.com) a game-based online education course designed to build core financial skills and acumen in young adults, is such an answer, and it comes in a form that appeals to today’s digital generation. In addition to providing an entertaining approach that maintains student interest, the online course also contains both pre- and post tests to gauge learning.  On the average, students enter the course with a D and earn a B+ by the time they have completed it.  Not only do they learn the concepts, but students who have completed the course have also reported that they’ve opened savings accounts, looked up their credit scores and one even went home to lecture her mother about credit card use. The game is being offered free to qualifying schools through next June.  The only associated cost is a $4 per learner fee that goes to support the storage infrastructure needed to host the online course to manage an influx of student learners.

Indeed, we need to pay more attention to providing the future generations with the tools to make better money decisions in the future.  It’s in our own best interest.

MoneyU®, the award-winning, game-based online education course designed to build core financial skills and acumen in young adults, “works,” according to an independent 2008 study conducted by Dr. Jack Naglieri a professor at George Mason University and expert on assessments.  His conclusion is based on an analysis of pre- and post-test scores of students who completed the MoneyU® course.

“The effect size demonstrates that these individuals learned within the game environment,” Dr. Naglieri said.  His summary of research states: “Four studies show that MoneyU’s game-based instruction leads to significant learning, even for students who have had some prior financial training.  The results were consistent across the four studies in high school and college classes, despite different teachers, curriculums and demographics. The data from these studies indicate that the differences in pretest and posttest scores were significant, and the effect sizes can be described as very large.”

MoneyU® was created to help address the crisis in teaching financial living skills to young adults.  Teaching credit, debt and financial skills is significant for high school and college students since it captures them at a moment when they are faced with critical financial decisions and choices for the first time in their lives.  Yet, most are unprepared.  Fewer than one in four in a Young Money poll felt they know enough about personal finances, and Jump$tart, which tests the financial literacy of high school students recently recorded its lowest scores since it began testing a decade ago.  Young adults just leaving school will experience independent living for the first time and will be confronted with such issues as credit cards, bills, starting salaries and savings.  And they have little or no experience and training to deal with them. 

Dr. Naglieri points out that young adults “are beginning to make independent financial decisions and mistakes, sometimes grave mistakes, with lasting consequences.”   Many parents don’t know how to teach personal finance, and school systems generally do not have the time or staff to commit to non-core, non-academic subjects, he says.  In addition, books on the subject are time-consuming, and lecture effectiveness varies with the skill and knowledge of the teacher. And although some financial institutions offer to educate, their materials are often perceived as biased.

Dr. Naglieri notes that the current young adult generation is all about the computer.  However, excellent computer-based instruction on financial issues is expensive to create. That fact prohibits individual school systems or even individual states from undertaking development.  He says MoneyU® is “a breakthrough solution that leverages the scalability, built-in assessment and cost-effectiveness of e-learning with the engagement and skills practice of games.”

Dr. Naglieri’s study used the results of MoneyU®’s built-in pretest and posttest scores from a sample of 187 high school and college students.  The pretest is comprised of 50 questions, presented in random order, which address the critical knowledge and skills young adults need to be successful and map to the content of the course.  Once the course is completed, the student is required to answer the same 50 questions in a posttest.  Based on Dr. Naglieri’s analysis, the differences between the two scores for all in the group “were attributable to the MoneyU course.  These results consistently show that the differences between the pretest and the posttest means were significant…and the differences were substantial…” 

He concluded by finding: “The students made substantial improvements after participating in the course.  Significant learning occurred with the money U course as evidenced by 98% of students passing the posttest after only 20% of them passing the pretest and the large effect sizes.”  Effect sizes in the four groups were 1.2, 1.6, 2.7 and 1.7 whereas, in education, an effect size greater than 0.8 is considered large, he said.

In short, Dr. Naglieri said, “It works.  MoneyU is not only a game that is designed to help people learn about financial literacy, but a game with a built in evaluation component.  It’s clear that a vast majority are benefitting by effect sizes and pass rates.” 

There is “compelling evidence of the effectiveness of the game-based learning environment of MoneyU,” he concluded.