Most Americans have extremely low levels of financial literacy, research suggests, despite its importance. The Jump$tart Coalition for Personal Financial Literacy tests 12th graders every two years by asking them practical money questions. The students consistently record an average score of 50 to 55 percent, generally considered to be a failing grade. Other research shows that about 3 in 4 workers don’t know how much money they need to save for a comfortable retirement. Only about half of respondents in one study were able to correctly answer two simple questions about interest rates and inflation.¹

The recent mortgage meltdown suggests that many people who signed up for risky mortgages were not aware of what they were signing and what the consequences would be. Americans are rapidly accumulating credit card debt; it’s up 6% over last year this time. Due to the hard economic times, many people are dipping into their 401Ks, without fully understanding the harsh penalties.

Think you’re pretty savvy about all things finance? Try taking the little quiz posted by Stephen J. Dubner, author “Freakonomics”. The quiz isn’t too tough (only three questions and I got all the answers right), but it will make you think, especially the question at the end of the article, “How did you learn about personal finance”?

What about that question? Could better education 30 years ago in grades K-12 have possibly prevented the current economic crisis by teaching people to better handle their debt? It’s an interesting mental exercise, but that question is impossible to answer. The good news is that economics is being taught much more in high school now than it was 20 or 30 years ago. (While “economics” is of course not the same as “personal finance” or “financial literacy,” let’s for the time being pretend that most economics courses give students a rudimentary understanding of personal finance.) According to the National Assessment of Educational Progress (”The Nation’s Report Card”), 9 of 10 high-school students said they were exposed to some economics education, up from 1 in 4 in 1982. According to the National Council on Economic Education, 17 states now require students to take an econ course to graduate, up from 13 states in 1998.

More resources:

• MyMoney.gov - U.S. government’s website dedicated to teaching all Americans the basics about financial education
• http://www.360financialliteracy.org/
• Jump$tart Coalition

Tell us - how did you learn about personal finance? Do you know of a new program to educate kids? How about adults?

¹US World News .

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