Facts About Financial Literacy and School-age Students

For many young adults, bad decisions about their finances can have disastrous results that can have serious impacts, sometimes lasting the rest of their lives. The problem lies in the failure to fully educate them about their financial lives.

We live in a world where financial products have become both more complex and more available, meaning that consumers are facing more choices but have little education on how to choose what is best for them. Schools forced by cramped time and budgets to prioritize for other subjects are still lagging in preparing students entering the working world. And parents are not confident about their own financial literacy and therefore less likely to discuss financial issues with their children.

Today’s high school and college students are in a situation in which they are making more spending decisions, and accumulating more debt at a time when debt pressures at the college level are impacting student performance and resulting in students dropping out of school.

More spending decisions by young adults translate to higher debt levels.

  • A 2006 study from Resource Interactive for the retailing industry concluded that children and teens influence as much as half of all spending in the economy - from fashion to the family car, and much more in between.
  • According to Sallie Mae, 84 percent of college undergraduates have credit cards and about half of them carry more than four credit cards.
  • The median debt of the 62 percent of public four-year college graduates who borrowed was $17,700 in 2007-2008, according to the U.S. Department of Education. Private four-year college grads who borrowed averaged $22,375 in debt. Those earning a bachelor’s degree from for-profit schools had an average debt of $32,653.

Financial literacy education leads to more savvy consumers.

  • Adults with financial skills and knowledge are better at keeping more of the money that they make through better retirement planning, saving and avoiding debt problems.
  • The average high school graduate will earn almost $3 million in his or her lifetime, according to the Employment Policy Foundation. If they learn early enough, they will be able to save so that they can retire comfortably. The average bachelor’s degree will earn an average $2.1 million more.
  • Parents don’t feel comfortable talking to their children about money. A study for Charles Schwab found that most parents would rather talk about the birds and the bees.
    • Less than 30% of American adults view their financial knowledge as very good. (National Financial Institute August 2007)
    • The most widely valued sources that people use to gain financial knowledge are family and then friends and colleagues (NFI)
    • Americans have a total of $2.5 trillion in outstanding consumer credit (Federal Reserve June 2009)
    • Teachers say that the lack of time, lack of state curriculum requirements and lack of demand are the top three challenges to teaching financial literacy, according to a survey of teachers by the Networks Financial Institute at Indiana State University.
      • Those who do teach financial literacy also say lack of materials, professional development and funds are challenges hindering teaching this subject.
      • Overall, very few teachers have been asked to teach more or to consider teaching financial literacy-related concepts in their classrooms.

Teaching financial literacy to high school and college students captures a teachable moment as young adults learn to live independently, begin making money and before they have accumulated major debts.

  • Fewer than 1 in four students feel that they know enough about personal finances. (Young Money poll)
  • A Federal Reserve study found that in states where financial literacy training is mandated, students save more and accumulate more wealth that other adults. (Minneapolis Fed Dec. 2002)
  • The financial literacy of high school students is at the lowest level since the scoring began by Jump$tart a decade ago.
  • The latest Alloy College Explorer survey found that the 13.8 million college students arriving on campus this year have $250 billion in spending power. That includes $56 billion in discretionary spending power to put toward such items as food, clothing, entertainment and technology. About three quarters of these students own MP3 players and digital cameras.
  • The Alloy survey found that among personal concerns, financial pressure tops the list as a major concern for one third of college students.

Student debt pressures at the college level can severely impact performance and lead to dropping out.

  • Student debt is rising faster than starting salaries for new graduates, according to The Project on Student Debt. The average student debt of the graduating class of 2007 was $20,098, up six percent from the previous year.
  • About half of entering college freshmen take out a loan to finance their education; and one-fifth of borrowers drop out.
  • Borrowers who dropped out were twice as likely to be unemployed as graduates; and more than 10 times as likely to default on their student loans.
  • Student loan default rates are rising rapidly. Default rates for federally guaranteed student loans are expected to reach 6.9% for fiscal 2007, up from 4.6 percent in 2005 and the highest rate since 1998.
  • The price of attending a public university has doubled, after inflation, over the past two decades, and family income and financial aid have not kept pace, according to The College Board.
  • Students are taking on riskier debt including unregulated private student loans.
  • In the past 15 years, the average debt load for student loans has increased by over 50 percent, and the percentage of students who borrowed has increased.
  • The Alloy College Explorer survey found that a quarter of college students are either working for the first time, grabbing more hours at their current job or getting a second job.