middle grades research series: financial literacy education

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MIDDLE GRADES RESEARCH SERIESMIDDLE GRADES RESEARCH SERIES

April 2015 www.careerandcollegeclubs.org

FINANCIAL LITERACYFINANCIAL LITERACYFINANCIAL LITERACY EDUCATIONEDUCATIONEDUCATION

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The Need for Financial Literacy Education in Middle Grades

Today’s teens confront greater financial challenges than previous generations.

Making sound financial decisions is harder today than in the past because of the increasing number and complexity of financial instruments (Campbell, J., 2006).

Today teens must contend with financial pressures that their parents or grandparents did not face. In a 2011 survey, 79% expressed concern about the high cost of college and 68% about the expense of computers and mobile devices (Charles Schwab, 2011).

Paying for college requires many students to borrow substantial amounts. 2014 college graduates accumulated education loans averaging over $30,000 (Reed & Cochrane, 2014).

Most children receive minimal, if any, financial education from their parents.

Many parents are not well-informed about financial issues themselves (Mandell & Klein, 2007).

Youth from less educated families score lower on financial literacy tests than students from better educated families who plan to pursue professional careers (Parrish & Servon, 2006).

African-American and Latino students perform lower on financial literacy tests (Mandell, 2009) than whites, undoubtedly attributable to the substantial gaps in wealth by race. In the greater Boston area, for example, only 74% of African Americans and 54% of Hispanics have checking accounts compared with 92% of whites (Munoz et al., 2015).

High school students demonstrate low levels of financial literacy, a situation which creates challenges for them as they transition from their teen years to young adulthood.

A national survey found that fewer than one in five high school students know that stocks have higher return rates than savings or checking accounts (Parrish & Servon, 2006).

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www.careerandcollegeclubs.org

FINANCIAL LITERACY EDUCATIONFINANCIAL LITERACY EDUCATIONFINANCIAL LITERACY EDUCATION

Lack of financial literacy can result in poor financial decision-making. One study found that 25% of college undergraduates had four or more credit cards, and 10% had outstanding balances of over $3,000 (Murray, 2000).

Impact of Financial Education on Students

Research on the impact of middle and high school financial education programs has produced mixed results.

Most programs measure student outcomes in terms of gains in financial knowledge, satisfaction, and confidence rather than long-term behavior change (Lopez-Fernandini & Murrell, 2008).

Some students who take a personal finance course are no more financially literate four years later than those who did not take the course (Jumpstart Coalition, 2008). At the same time, other programs demonstrate a positive effect on students’ knowledge (Harter & Harter , 2007).

A number of programs produce short-term gains in knowledge of financial concepts; however, these gains disappear over time when students who took such courses compared to students who did not (Mandell, 2009).

Financial education programs that are integrated into the school day and emphasizes the ways in which financial literacy is important to students’ future lives are more effective than programs that do not.

Extended financial education programs that are part of students’ classroom experiences have been found to increase middle school students’ financial knowledge relative to those students who did not have such exposure (Batty, Collins & Odders-White, 2014).

Programs that emphasize the ways in which financial literacy is important to students’ future lives are more effective than those that do not (Mandell & Klein, 2007).

Integrating financial knowledge with hands-on activities increases students’ performance on literacy tests more than programs focusing exclusively on knowledge alone (Sherraden et al., 2011).

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Applying financial concepts as part of a financial education program increases what students learn.

Middle school students who participated in Junior Achievement’s hands-on Financial Park activities understood more about personal finances and the importance of education to future opportunities than students who did not participate (Junior Achievement, 2009).

Participation in the Stock Market Game significantly increased the math achievement of 6th - 10th graders as well as their scores on financial literacy tests (Hinojosa et al., 2009).

Low-income elementary school students who opened savings accounts as part of a financial literacy course they were taking had larger economic vocabularies, talked more about spending and savings, and expressed greater confidence in their financial abilities that students’ who did not participate in the course (Sherraden et al., 2011).

While financial education may not always improve students’ financial literacy, there is strong evidence linking financial education to future financial behavior.

A longitudinal study found that young adults who had taken a high school course in money management were more likely to pay credit card bills on time and balance their check books that those who had not taken such a course. The course takers also had less credit card debt and bounced fewer checks than non-course takers (Mandell, 2009).

Another study found that adults who had taken a personal finance course in high school saved more money than adults who had not taken such a course (Bernheim, 2001).

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Career & College Clubs

We published the Middle Grades Research Series to help spread the word on the middle grades’ importance, and to document Career & College Clubs’ basis in research.

Career & College Clubs believes—and research confirms—the middle school space, that critical time when young people begin forming the attitudes, thought patterns, and work habits that they will carry through the rest of their lives, is a key leverage point: reaching students in the middle grades will have a positive impact for high school, college, and beyond.

Career & College Clubs is a comprehensive, standards-aligned program that explores academic and social-emotional concepts critical for success in high school, college, and life. In addition to professional development for staff, the program includes a curriculum with up to two years’ worth of activities covering college and career readiness, the college admissions process, personal financial literacy, job readiness skills, leadership skills, and community improvement.

The program uses a peer-to-peer learning model to engage students in the material and influence their friends, resulting in a school-wide improvement in culture.

Reviews of the program by ACT, Inc. have found that Career & College Clubs has a significant impact on students and their peers, improving student aspirations and college enrollment rates.

For more information:

Career & College Clubs www.careerandcollegeclubs.org 310-242-8860 [email protected]

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References

Batty, M., Collins, J.M. & Odders-White, E. 2014. “Experimental Evidence on the Effects of Financial Education on Elementary School Students' Knowledge, Behavior, and Attitudes.” The Journal of Consumer Affairs, 10.111.

Bernheim, B., Garrett, D., & Maki, D. 2001. “Education and Saving: The Long-Term Effects of High School Financial Curriculum Mandates.” Journal of Public Economics, 80, 3, 435-465.

Campbell, J. 2006. “Household Finance.” The Journal of Finance, 61, 4, 1591.

Harter, C. and Harter, J. 2007. Assessing the Effectiveness of Financial Fitness for Life in Eastern Kentucky. Paper presented at the American Economic Association Meetings, Chicago, IL, 2007.

Hinojosa, T., Miller, S., Swanlund, A., Hallberg, K., Brown, M. & O'Brien, B. 2009. The Study of The Stock Market Game. Washington, DC: Learning Point Associates.

Junior Achievement. 2009. Impact. Charlotte, NC: Junior Achievement of Central Carolinas.

Lopez-Fernandini, A., & Murrell, K. 2008. The Effectiveness of Youth Financial Education. Summary of a convening held July 15-16, 2008, at the New America Foundation.

Mandell, L. 2008. The Financial Literacy of Young American Adults: Results of the 2008 National Jump$tart Coalition Survey of High School Seniors and College Students. Washington, DC: Jump$tart Coalition.

Mandell, L. 2009. The Impact of Financial Education in High School and College On Financial Literacy and Subsequent Financial Decision Making. Paper presented at the American Economic Association Meetings, San Francisco, CA, 2009.

Mandell, L. & Klein, L. 2007. “Motivation and Financial Literacy,” Financial Services Review 16, 106-116.

Munoz, P., Kim, M., Chang, M., Jackson, XR., Hamilton, D., & Danty, Jr., W. 2015. The Color of Wealth in Boston. Boston, MA: Federal Reserve Bank of Boston.

Murray, D. 2000. “How Much Do Your Kids Know About Credit?” Medical Economics, 77 16, 58-66.

Parrish, L. & Servon, L. 2006 Policy Options to Improve Financial Education: Equipping Families for their Financial Futures. Washington, DC: New America Foundation.

Reed, M. & Cochrane, D. 2014. Student Debt and the Class of 2013. Oakland, CA: The Institute for College Access and Success.

Schwab & Co. 2011. 2011 Teens & Money Survey Findings: Insights into Money Attitudes, Behaviors and Expectations of 16- to 18-Year-Olds. New York, NY: Charles Schwab & Co.

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Sherraden, M., Johnson, L., Guo, B. & Elliott, W. 2011. "Financial Capability in Children: Effects of Partici-pation in a School-based Education and Savings Program." Journal of Family & Economic Issues, 32.3, 385-399.

Walstad, W., Rebeck, K. & MacDonald R. 2010. "The Effects of Financial Education on the Financial Knowledge of High School Students." The Journal of Consumer Affairs, 44.2, 336-355.

middle grades research series: financial literacy education

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