Goalsetter, a family finance educational platform that focuses on spending and saving, released the findings of its latest study: “Are You Financially Smarter Than a High School Student?”, a look at the state of financial education for students at major universities in the United States.
The quiz results found a widespread deficiency in understanding the basics of personal finance, with students scoring an average of 51% on the quiz.
The assessment, conducted by Goalsetter, studied the financial literacy levels of 1,065 college students at three of the top ten universities through an online questionnaire based on the high school financial literacy standards from Jumpstart.org and the Council on Economic Education. (EEC).
The results exposed a striking gap in basic financial knowledge, indicating an urgent need for improved financial literacy initiatives for U.S. teens and young adults.
Before taking the exam, 55% of students believed they had “a solid understanding of the basics of personal finance.” After answering the 15 questions in the questionnaire, the percentage of students who felt confident in their knowledge dropped to 30%.
Key findings from the evaluation:
Below average scores
On average, students obtained 51%, with the scores of low-level students being even lower at 48%, both considered insufficient grades.
Budgets and savings
Not surprisingly, 93% of students surveyed have a debit card, indicating their familiarity with spending. However, only 48% understood the power of compound interest and only 47% knew about the 50/30/20 budgeting rule.
Credit and debt management
While 70% reported having a credit card, most do not understand recommended strategies for managing credit card debt.
Investment and retirement
Of the 1,065 students who took the questionnaire, 58% plan to retire early, but only half of those who do understand what an IRA is.
“The results of this study underscore the critical need for earlier preparation when it comes to financial education,” said Tanya Van Court, CEO of Goalsetter.
“When we put debit and credit cards in the hands of teenagers, but don’t teach them the basics of saving, investing, and budgeting, we are teaching them to be competent ‘senders and spenders’ of money rather than savers and investors. No socioeconomic group is immune to the danger posed by a lack of financial education. Cultivating a financially literate future generation helps ensure our nation’s economic security,” Van Court added.
For more information about the questionnaire and to access the full report, go here.
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