#25. Martha Washington is the only woman whose portrait has appeared on a U.S. currency note.
Do You Have a Clue about Money?
Do you know the answers to these questions?
- Would stocks or a U.S. savings bond give you higher growth over 18 years of saving for a child's education?
- If a thief stole your credit card and ran up $1,000 in debt on the card would you have any liability? That is, would you have to pay anything to the credit card company?
The answer to the first question is “stocks.” A U.S. savings bond is a more conservative investment, which means that you’d earn money more slowly with it.
The answer to the second question is yes, you would have liability. Liability is limited to $50 after the credit-card issuer is notified.
How did you do? Compare your responses to your high school peers who participated in a survey in which those two questions were asked. The response rates are shown below:
- Only 16.8% answered correctly that stocks likely would offer the higher growth over 18 years of saving for a child's education. And 37.3% thought a U.S. savings bond, noted for its conservative investments, would offer the highest growth.
- Nearly 53% said they would have no liability if a thief stole their credit card and ran up $1,000 in debt on the card. Liability is limited to $50 after the credit-card issuer is notified. Only 13% knew they might have to be responsible for $50.
These two questions were part of a survey that’s conducted every two years by the Jump$tart Coalition for Personal Financial Literacy, an organization that promotes financial competence for students.
What the Results Mean
The survey results show that high school seniors' knowledge of finance has dropped the past two years. In fact, high school seniors, on average, answered correctly less than half (48.3%) of questions about personal finance and economics in a nationwide survey released in April 2008 by the Federal Reserve, the central bank of the United States.
The score compares with 52.4% answered correctly in the 2006 study. This year's was the worst score out of the past six surveys conducted so far.
Why the Survey Matters and What You can Do
Experts call understanding financial matters “being financially literate.” You can think of it as “knowing how to make the right decisions with your money.”
It’s a good idea to learn how to handle money now while you’re younger. You’re at a good age to try different types of saving and investing. Mistakes you make now aren’t as likely to be as costly as those you might make when you’re in your 20s or 30s.
Right now, you also have access to information from parents and other trusted adults. In fact, most teens—including you—get the majority of their financial education at home. But that education is only as good as their parent’s skills—and/or the amount of time that parents devote to explaining finances to their children. Your parents could fall into any number of categories, such as:
- They have great financial skills and the time to teach you.
- They have mediocre financial skills and may or might not have time to teach you about finances.
- They have excellent financial skills but no time to share their knowledge with you.
Now matter what level of financial skills your parents possess, now is the time to ask them and other adult relatives for information. Ask them how they save and how they invest. Ask them, too, how they learned to handle money. Perhaps they had to teach themselves. Maybe they took a course in high school or college.
At school, ask your counselor or some teachers if they can point you in the direction of financial information. Several publications, both online and off, can explain the basics—including the benefits of compound interest.
No matter what your parents can teach you, the key is practicing what you learn. Practice saving some of your money each time you get some, whether from a paycheck or as a gift. (Deposit your money in your credit union account so you won’t be tempted to spend it.) Soon, saving will be a habit—especially when you see how your money grows.
What you learn and begin practicing now can help ensure that you’ll have money to make decisions about later.
