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High school seniors failing in finance

High school seniors don't know enough to make well-informed financial decisions and need more instruction in personal finance, according to a recent survey of thousands of students.

The seniors had an average score of 52.4 percent on the 2005-06 JumpStart Coalition's biennial survey that tests 12th-graders' knowledge of personal finance basics. The coalition is a national association that promotes the teaching of personal finance.

The score is one-tenth of a point higher than the last survey's score. In fact, average scores have remained in the low 50s since the average dropped from 57.3 percent in 1997-98.

"It's too small to be statistically significant, so what it means to me is that there hasn't been any change," says Dr. Lewis Mandell, a professor of Finance and Managerial Economics at SUNY Buffalo School of Management who conducted the Merrill Lynch-sponsored test.

The written survey was presented in December and January at 305 high schools in 37 states. Teachers administered the test primarily in English and social studies classes.

"We target students in classes other than finance and money management because we are testing general financial literacy and not what students can recall from a financial management course," says JumpStart Executive Director Laura Levine in a written statement.

Levine says the increased participation -- 5,775 students in total participated -- indicates that "educators across the country are beginning to recognize the importance of financial literacy and the need for financial literacy education."

The students faced questions such as: "Which of the following instruments is not typically associated with spending: cash, credit card, debit card, certificate of deposit?" and, "Many savings programs are protected by the federal government against loss. Which of the following is not: a bond issued by one of the 50 states, a U.S. Treasury Bond, a U.S. Savings Bond, a certificate of deposit at the bank?"

(Want to see how you compare to the high school seniors? See "Can you pass a personal finance test?" for a short version of the survey questions.)

Mandell says the survey raised an important question. "What we don't know is why kids who have a class in personal finance don't do better."

He believes these students are either not learning or not retaining the information even though more students have taken a personal finance course.

"The survey found that the students haven't scored higher than the overall average score. Of all the studies that we've done, the results have been consistent. We're not saying that the kids don't know more on the day of the final than the day of the class. But as opposed to other courses that we teach it's important that they remember this stuff."

Additional findings showed students, overall, didn't grasp important concepts such as stocks.

Only 14.2 percent of students felt that stocks would have the highest growth over periods of time as long as 18 years, despite the fact that there hasn't been an 18-year span when this was not true. This is the lowest the score has been in the history of the survey.

Next: "I don't think we teach our kids what it means. ..."
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