The OECD PISA international assessment of financial literacy released last week reveals that around one in seven students in the 13 OECD participating countries and economies are unable to make even simple decisions about everyday spending, and only one in ten can solve complex financial tasks.
So, to answer the question posed in this post’s title: Not very high.
What was this study about?
We are excited to launch the first post of our Spotlight series, where we’ll talk with teachers who are making a difference in the field of economic education.
Our first feature is on Cheryl Shea, who teaches high school business, marketing, entrepreneurship, and financial literacy at Pinnacle High School in Phoenix, Arizona. She is affiliated with their local community college district, so her students are able to obtain Dual Enrollment college credit. Cheryl has also been a DECA advisor for seven years.
Here is what she said.
Photo credit: Thayer School of Engineering at Dartmouth College
Riley Ennis, 20, is the CEO of a biotechnology startup, Immudicon LLC. In high school, Riley worked for three years on a cancer vaccine that teaches the immune cells of the body to recognize and remove tumors. Immudicon is focused on further research and licensing the cancer vaccine platform technology. Riley is currently a junior at Dartmouth College, where he is double majoring in economics and biomedical engineering.
We asked Riley what advice he would give to other young people who have aspirations in business.
Here’s what he said.
If you’ve ever wondered if a new teaching strategy, school improvement program, or educational policy actually works from an evidence-based perspective, then consider subscribing to the What Works Clearinghouse (WWC) Study Review series. Every month (roughly) the WWC releases short (two-page) reviews of important educational studies by describing the intervention and the findings.
These high level snapshots of research are a quick read and point you to deeper information about the study’s details. In addition – and this is the big value-add! – the WWC provides a rating of each study based on the scientific quality of the research design and analysis.
This post is by guest writer Laura Choi, who is a Senior Research Associate with the SF Fed’s Community Development department. Laura researches a variety of issues aimed at improving economic opportunities for low- and moderate-income communities. Read her full bio here.
With graduation season upon us, it’s a great time to get your students thinking about the future. There’s no question that a college degree is becoming more and more of a necessity in today’s economy. A recent Econcepts blog post highlighted new research from the SF Fed showing that a college degree is a worthwhile investment for the average student as it leads to higher lifetime earnings.
At the same time, the news is filled with stories of individuals struggling to repay their student loans, and President Obama just announced new executive actions to “lift the burden of crushing student loan debt.”
But student debt doesn’t have to be crushing or scary, and a little information can go a long way in helping students make sound financial decisions when it comes to financing higher education.
Here are a few ideas that can help your students get a better understanding of student debt.
Money. We use it daily, whether electronically or as cash (the demise of which is greatly exaggerated). We are all are familiar with it in its current form. But how much do you know about the history of money? Use these five surprising facts to help history come alive for your students through currency.
1. Before the Civil War, paper money could be issued by nearly anyone
Private Bank Note, Drover’s Bank, Salt Lake City, Utah, $3, 1856
Between 1837 and 1866, a period now often called the “Free Banking Era,” lax federal and state banking laws permitted virtually anyone to open a bank and issue currency. Paper money was issued by states, cities, counties, private banks, railroads, stores, and churches. In the 1860s, an estimated 8,000 different state banks were circulating bank notes in denominations from ½ cent to $20,000!
These notes came in a variety of sizes, colors, and designs, and that combined with an environment of uneven regulations from area to area is widely considered to have increased the public’s appetite for centralized banking regulation.
As the American population moved Westward, some of the issuing institutions earned the dubious nickname “wildcat banks,” in reference to their remote locations, more accessible to wildcats than people. The Free Banking Era ended with the passing of the National Bank Act of 1863.
If you’re looking for a quick start into the issue of income inequality, our new DataPost series might just do the trick. The series uses a fairly simple comparison to define income inequality and chart that comparison over time. The full series includes: U.S. Household Incomes: A Snapshot, Median Household Incomes: Life in the Middle, and Income Inequality: Measuring the Gap.
To introduce the idea of income equality to your students, consider using the following three charts.
1. Income Distribution
The first place to start the discussion is by taking a look at the distribution of U.S. household incomes. The chart below gives the percentage of U.S. households in each income category. At the lowest end of the distribution, 3.4% of American households earned less than $5,000 in 2012. At the highest end of the distribution, 4.5% of American households earned $200,000 or more in 2012.
There are some interesting things to note about the shape of this distribution. First, there are more households in the lower income categories than you might expect. In a normal distribution – think the bell shaped curve – values tend to pile up in the middle. Here, though, there are greater concentrations at the low end of the distribution.
It’s easy to become complacent about our finances with the vast number of websites, apps, and businesses available today that specialize in helping people manage their money. Granted, technology can be a powerful partner in financial management, but it cannot replace a strong understanding of factors that should inform decisions about how, where, and when we spend our money.
Why is financial literacy more important than ever?
Our financial landscape has grown increasingly complex. Before a young person approaches college or a career, he or she is faced with big decisions on how much money to borrow for tuition, how much to save, how to invest, and how to grow and protect their budding wealth.
Image via GW Today
Dr. Annamaria Lusardi, a professor of economics and accountancy at the George Washington School of Business, wanted to test how financially literate populations are, both in the United States and internationally. What she found was surprising. She discussed her research recently at a TEDx Foggy Bottom gathering.
Join us in San Francisco on August 15 for an exciting and unique opportunity!
Meet the Experts is a speaker series designed to provide secondary and post-secondary educators with an opportunity to interact with leaders from throughout the Federal Reserve Bank of San Francisco. Our objective is to foster greater understanding about the roles and responsibilities of the Fed and to highlight emerging issues in the economy.
The event is a professional development opportunity that will bolster your knowledge about economics, and you will return to your students with fresh content and new teaching ideas. Set yourself up for success in the upcoming school year and register today.
Confirmed speakers include:
John C. Williams, President and CEO of the SF Fed. John is an expert on monetary policy and business cycles, and is a strong advocate for economic education.
Mark A. Gould, First VP and COO at the SF Fed. Mark is responsible for all administration, operating, and financial services activities. He is also product director of the Federal Reserve System’s Cash Product Office.
Mary C. Daly, Senior Vice President and Associate Director of Research at the SF Fed. Mary specializes in labor markets, public economics, and social welfare.
Kevin Lansing, Research Advisor, Federal Reserve Bank of San Francisco. Kevin specializes in macroeconomics, monetary economics, and asset pricing.
This event is open to high school, community college, and university educators. Students in teacher education programs are also welcome to attend. There is no fee for this event.
We are still in the planning stages of this event, and details are subject to change. Please check back for updates. Last year’s agenda will give you an idea of the exciting and informative content that will be included in the day.
Register now! We look forward to having you join us.
Has the high cost of college tuition discouraged your students from considering college a viable option? A new study from our researchers here at the SF Fed suggests that a college degree is still a great investment for the average student.
Three Reasons to Get that Degree
1. Higher Annual Earnings: Although common knowledge, it’s worth repeating – college graduates, on average, out earn high school graduates year in and year out. In 2011, the difference between annual wages of someone with a four-year degree and a person with a high school degree averaged $20,050. That’s a 61% earnings “premium” for having a college degree (see chart below).
