Weak Financial Literacy Scores Threaten a Global Education Movement

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The global movement to teach kids about money in school has produced little hard evidence that the effort is paying off. That doesn’t mean it’s all been a waste of time, or that we’ll never get the results we want. But it certainly gives doubters ammunition. In a series of financial literacy tests dating to 1997, the JumpStart Coalition for Personal Financial Literacy has found that young people’s understanding of personal finance has remained consistently sub-par. Given the energy put into financial education over the past decade, this is disheartening news. Meanwhile, the FINRA 2009 National Financial Capability study found that only 30% of the population can do a simple 2% calculation and has even a basic understanding of inflation and risk diversification. The 2012 wave of that study will be released soon and reportedly shows no improvement. (MORE: 4 Easy Steps to Raising Money-Smart Kids) Weak financial literacy scores have galvanized dozens of nations, thousands of nonprofits, and countless educators and policymakers in the attempt to raise the financial I.Q. of people around the world. But test scores that show no improvement are now galvanizing the opposition, which believes no amount of instruction will lead to broad improvement in the way individuals manage their money. This lack of evidence presents a huge challenge to the financial education movement if it is ever to amount to more than a bunch of disjointed initiatives funded in large part by highly conflicted banks and other financial institutions. Unfortunately, proving long-term behavior change in a fairly new area of study can be difficult. In my view, the effort is worthwhile. It simply makes no sense that people cannot learn to be better money managers. We have to keep trying and keep looking for a method that works. Young people are starting to understand that personal financial management is a skill they’ll need for a lifetime. We should give it to them. In recent testimony before a Senate subcommittee on Children and Families, Annamaria Lusardi, director of the Global Center for Financial Literacy at

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