Financial Literacy: If it's so Important, Why Isn't it Improving?

Networks Financial Institute Policy Brief No. 2006-PB-08

11 Pages Posted: 10 Aug 2006  

Lewis Mandell

State University of New York (SUNY) - Financial & Managerial Economics

Date Written: April 2006

Abstract

Financial literacy has assumed greater importance in our society as the result of the increasing complexity of financial products and the simultaneous cutting of economic safety nets by government, employers and even parents who worry about their own retirements. If the problem isn't solved and consumers don't look out for themselves, they may exercise a "put option" by throwing themselves on the mercy of taxpayers when they cannot support themselves in retirement. In addition, a lack of financial literacy may contribute to seemingly "irrational" behavior that distorts financial markets. Measured financial literacy scores among high school seniors is low and has even declined since 1997. More distressing is the fact that students who take a course in personal finance end up no more financially literate than those who don't. Tracking students who took such a course over a 5 year period shows no positive impact on financial literacy, attitudes toward thrift or behavior. The only bright spot is the stock market game which consistently increases literacy scores, indicating that teaching should be interactive, contemporary and "fun."

Keywords: Financial literacy, financial well being, social put

Suggested Citation

Mandell, Lewis, Financial Literacy: If it's so Important, Why Isn't it Improving? (April 2006). Networks Financial Institute Policy Brief No. 2006-PB-08. Available at SSRN: https://ssrn.com/abstract=923557 or http://dx.doi.org/10.2139/ssrn.923557

Lewis Mandell (Contact Author)

State University of New York (SUNY) - Financial & Managerial Economics ( email )

Buffalo, NY 14260
United States

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