Study Shows Majority Americans Would Fail a Basic Financial Literacy Quiz
Wednesday, June 11, 2014 3:40 PM

There are times here at Claim Your Youth CULTURE that we are asked why we do what we do. Why do we focus on financial literacy for kids and teens when they aren’t making major financial decisions? What’s the point of introducing topics like investing, interest, or budgeting to children when they will just learn about them when the time comes like everyone else?

Then a study comes out, like this one from economists Annamaria Lusardi of George Washington University and Olivia S. Mitchell of the Wharton School of the University of Pennsylvania, which asks Americans over fifty three simple finance questions to gauge general levels of financial literacy in adults, and we feel justified in our mission.

The questions are as follows:

• Suppose you had $100 in a savings account and the interest rate was 2 percent a year. After five years, how much do you think you would have if you left the money to grow? More than $102, exactly $102 or less than $102?

• Imagine that the interest rate on your savings account was 1 percent a year and that inflation was 2 percent. After one year, would you be able to buy more than, the same as or less than you could today with the money?

• Do you think this statement is true or false: “Buying a single company stock usually provides a safer return than a stock mutual fund”?

The study showed that only thirty percent of people surveyed could answer all three questions correctly. That’s right, seventy percent of people surveyed could not answer these three questions correctly. Moreover, those people surveyed were adults over fifty who have had plenty of time to become experts in finance. It begs the question, how would the rest of the population fare?

Articles about this study have been bouncing around since it was completed in 2011, but they have been in the news more frequently as of late.

The New York Times has it here.

The Atlantic has it here.

Business Insider has it here.

These news establishments see the same thing that we, at Claim Your Youth CULTURE have seen for years-financial literacy is at an all time low and it’s only going to get worse. It’s time to intervene. It’s time to put financial literacy back on the map, starting with our kids and teens. They need to have a foundation of finance knowledge to take with them so that they are not overwhelmed and unprepared for the financial challenges they will face as adults. That is exactly what we do here at Claim Your Youth CULTURE.