ICFE eNEWS #17-09 - March 1st 2017
How Do We Get Teens To Care About Their Financial Future?
U.S. Lags in International Financial Literacy
(from the National Endowment for Financial Education (NEFE))
DENVER - A recent analysis on the financial proficiency of
teenagers shows Americans are uniquely in peril as the U.S. is
the only country demonstrating low financial literacy levels
compounded with low retirement income replacement rates.
Analyzing data from the 2012 Program for International Student
Assessment (PISA), which was administered to approximately
29,000 students in 18 competing countries, a study funded by the
National Endowment for Financial Education® (NEFE®) and
conducted by researchers at George Washington University links
financial literacy to how much working income one can expect to
receive from their national pension system. For example, in the
U.S. Social Security payments on average only cover 45 percent
of worker's former income in retirement, compared to countries
like Spain, which covers 89 percent, and Italy, which covers 80
"The rules of retirement have changed and people
are living longer. The challenge for all is how you will fund a
30-year retirement with a 40-year career. The bigger question is
how we get teens to care about retirement," says Billy Hensley,
Ph.D., senior director of education with NEFE. "Financial
literacy helps people understand the importance of saving and
reaching goals. But without financial education many Americans
struggle to make up the additional 55 percent of expenses that
are not covered by Social Security. Young adults in particular
need to start thinking about how they will cover this
Researchers at George Washington University
analyzed the PISA financial literacy data alongside pension
generosity data from the Organization for Economic Cooperation
and Development (OECD), the PISA study's oversight agency. In
countries with higher retirement income replacement rates it's
not uncommon to find students with lower financial literacy
"In countries like Spain, Italy and Russia, lower
financial literacy is less of a concern because higher pensions
take care of retirees," says Hensley. "We also find students
with higher financial literacy scores in countries where there
are lower retirement income replacement rates. Since more of the
burden falls on individuals, they have an incentive to boost
their financial capability to save and invest for the long
term," adds Hensley.
The U.S. is the only country in the
study with both comparatively low income replacement rates and
lower financial literacy scores.
"Within the U.S. there
is promise. There are many random acts of success on the state
level from those who offer financial education and do it well.
What we need are stronger mandates for personal finance
education," says Hensley.
According to the
JumpStart Coalition for Personal Financial Literacy, 22
states have a requirement in place to offer a high school course
in personal finance education, 17 states require a high school
course to be taken for graduation, and seven states have
standardized testing of personal finance concepts.
George Washington University study underscores the importance of
financial education”early and repeatedly at home and in school,"
says Hensley. "We need to continue to support the financial
education infrastructure by improving teacher preparedness and
promoting a coherent set of national standards for teaching
personal finances in middle and high schools."
findings of the research,
This research analyzes findings from the Organization for
Economic Cooperation and Development (OECD) 2012 Program for
International Student Assessment (PISA) financial literacy data
and their implications for the development of sustainable
retirement systems. The study was led by Annamaria Lusardi,
Ph.D., academic director of the Global Financial Literacy
Excellence Center (GFLEC) and Denit Trust Chair of Economics and
Accountancy at the George Washington University School of
Business; and Carlo de Bassa Scheresberg, senior research
associate at GFLEC.
About the National Endowment
for Financial Education (NEFE)
NEFE is a nonprofit foundation that inspires empowered financial
decision making for individuals and families through every stage
of life. For more information, visit www.nefe.org.
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Paul S. Richard
President - Executive Director
Institute of Consumer Financial Education (ICFE)
About the ICFE:
The Institute of Consumer Financial Education (ICFE) was founded in 1982 by
the late Loren Dunton (creator of the Certified Financial Planner (CFP)
designation and founder of the College for Financial Planning in Denver, CO.)
The ICFE is dedicated to helping consumers of all ages to improve their spending
practices, increase savings and use credit more wisely.
The ICFE is an
award winning, nonprofit, consumer education organization that has helped
millions of people through its financial continuing education courses programs
and resources. In addition to eight Certification courses covering identity
theft, credit files, credit repair and credit scoring, among others, it also
publishes the Do-It-Yourself Credit File correction Guide, which is updated
annually. The ICFE has distributed over one million Credit/Debit Card Warning
Labels and Credit/Debit Card Sleeves world wide.
The ICFE is a partner
with the national Jump$tart Coalition for Financial Literacy and the California
Jump$tart chapter. The ICFE staff is also active with San Diego Saves and
Military Saves, both offshoots of America Saves.
The ICFE is also an
on-line help for consumers who spend too much. ICFE's spending help was featured
in PARADE Magazine in the Intelligence Report section. The money helps and tips
are from the ICFE's Money Instruction Book, our course in personal finance.
The ICFE helps consumers and students with mending spending, learning about
the proper use of credit, budget and expense guidelines, how to set up and
implement a spending-plan and also how to access financial education courses and
how to teach children about money. Other ICFE services include: Ask Mr. G
library, a free eNews service, and an online resource center for students,
parents and educators, plus financial education learning tools in the ICFE Book