Much has been made of the sorry state of financial literacy in
the U.S. So it was eye-opening to sit in on the
Financial Literacy and Education Summit
, sponsored by the Federal Reserve Bank of Chicago and Visa, and to
see how this country stacks up against the rest of the world.
At this sixth annual summit, I announced the results of the 2012
Global Financial Literacy Barometer, which surveyed residents of 28
countries. The U.S. finished fourth, behind Brazil, Mexico and
Australia. Obviously, the U.S. could have done better. But given
the concern about financial capability, it was somewhat surprising
that we fared as well as we did.
In the survey, which was commissioned by Visa, respondents were
asked whether they discuss financial issues with their children,
and whether they think teens and young adults in their country were
adequately prepared to manage their money. They were also asked
about their own money management habits -- whether they follow a
household budget and how much money they have saved for a financial
emergency.
Overall, respondents in more than half of the countries thought
that their kids didn't understand money-management basics, such as
budgeting, saving, managing debt and spending responsibly. In the
U.S., a whopping 70.5% of those surveyed shared that sentiment,
putting the U.S. at the bottom of the pack in parents' opinion of
their kids' financial savvy.
That could be because people in other countries spend more time
talking with their children about finances. Mexicans estimated they
talk to their kids about money-management issues on about 42 days
per year, and Brazilians said 38 days. In the U.S., the figure was
25.8 days. In general, parents in wealthier nations spent less time
talking to their children about money, and the U.S. fell into the
middle of that group.
In addition, residents of other countries felt that schools
should be required to teach financial education at an earlier age
than did Americans. The worldwide average was 11 years old,
compared with about age 12 in the U.S. and age 9 in top-ranking
Brazil.
On the budgeting question, the U.S. finished a surprisingly high
sixth, with 54% of respondents saying that they follow a budget
closely or most of the time. But that doesn't necessarily translate
into higher savings. The Chinese were the world's best savers, with
3.9 months' worth of expenses, on average, squirreled away. In the
U.S., the figure was 2.9 months. Worldwide, 68% of respondents said
they have fewer than three months' worth of emergency savings.
As sobering as the statistics may be, I'm always encouraged by
how quickly kids can sharpen their financial skills when presented
with a lesson that engages their interest. One of the events at the
financial summit was a rousing game of Financial Football (
www.practicalmoneyskills.com
), a video game developed by Visa for students ages 11 and up. Two
teams of students, from Vernon Hills High School and Libertyville
High School, both north of Chicago, gained yardage and scored
points by correctly answering multiple-choice questions on a wide
variety of financial topics. Example: "A check card is the same as:
1) a gas card; 2) a debit card; 3) a credit card; or 4) a
membership card."
And I hope the kids will remember the takeaway from Chicago
Bears linebacker Lance Briggs, who was a guest "coach": "If you're
driving a bucket and you want a fancy car, keep the bucket until
you can comfortably afford the car. If it's worth having, it's
worth waiting for."
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