From USA Today
Monday April 22, 2002

Pity the poor high school students who get near-daily reminders of how ignorant they are. The latest come courtesy of a survey of 4,000 12th graders by the Jump Start Coalition for Personal Financial Literacy, which found that students answered just half of the basic money questions correctly. Fewer than one in five, for example, knew that stocks perform best over long term. And just one in four understood that bank account interest is tax deductible.

This is a failing grade, to be sure. But even if schools spent more time and money teaching about finances, as Jump Start advocates, there's no guarantee they would produce meaningful results. High schoolers don't need to know much about money beyond where their parents keep it.

A recent survey sponsored by AARP, found that a pathetic 11% could answer all four basic financial questions correctly. Just half of all middle-aged people, for example, knew that mutual fund losses aren't insured by the federal governments deposit insurance program. About 40% knew that diversifying an investment portfolio reduces risk. Another survey found that one in five don't know they can lose money in stocks.

Nor do parents set a good example of money management for their progeny. More than half roll over credit-card debt each month: fewer than 50% make a budget and stick with it. Workers, particularly low-income often don't invest their 401(k) money correctly, either overloading on company stock or putting too much in low-performing bonds. Most families are not saving nearly enough for their retirement years.

At a time when more families are expected to direct their own investing decisions, this knowledge gap threatens their prospects for a comfortable retirement.

Fixing it will require a far more comprehensive effort than browbeating high school administrators. Employers for example, are reluctant to offer any investment advice because of liability concerns, a problem that can be fixed by pending federal legislation. Community organizations and other groups, meanwhile, need to get more active in helping families understand money management. The government should take a more active role in educating people about the basis of investing.

Until adults wise up, about money, they shouldn't expect much financial aptitude from their children.