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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 percent.

"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 shortfall."

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 levels.

"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.

"The 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."

For complete findings of the research, click here.

Study Details:
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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Sent by:

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 Store.

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