High School Students Are Receiving Poor Education

¶ … high school students are receiving poor education as regards financial literacy (e.g. NAEP, 1979). Mandell (1997), for instance, reports that high school students have an average score of 57% in terms of money management, savings and investment, spending and other areas of income. HS graduates, in other words, have weak financial literacy. Adults also, generally, are almost totally illiterate regarding retirement and investment decision-making. A study of 552 adult females found that 56% were ignorant about the fundamentals of investing (Chen & Volpe, 1998).

A further study found that most Americans fail to save for retirement or fail to save for emergencies possessing a false confidence about financial security of their future (ibid.). About 71% of all workers and 81% of retirees in the study scored 60% or less in knowledge of financial matters. In their same review, Chen and Volpe (1998) showed that the Institute of Certified Financial Planners (1993) surveyed 123 Certified Financial Planner licensees and found that financial illiteracy was a major problem when making financial decisions. Investors lack a solid knowledge of financial issues, and many workers are poor on basics of financial knowledge.

Most studies focus on financial literacy on high school students and adults, but few -- if any -- investigate the level of financial literacy amongst college students. One of the few studies that do so is that of Danes and Hira (1987) where they surveyed 323 college students from Iowa State University assessing their knowledge of insurance, credit card management, record keeping, personal loans, and general financial management. They discovered that financial literacy was low. Whilst informative, their study also suffered from certain limitations including the fact that their sample was obtained exclusively from one university and that there survey involved only a few items. Their limitations are compounded by the fact that they failed to match their sample with a contrasting one, such as with HS graduates in order to assess whether the participants improved in their financial literacy as a result of their college experiences, or whether financial literacy remained unchanged between HS students and college graduates.

What this study seeks to investigate, therefore, is whether college students would have a better grasp of financial literacy than high school graduates have and whether this improved financial literacy is a result of their college experiences.

The research question would be the following: Is there any improvement in financial literacy between a non-college student and a post college student.

Hypothesis 1:

Positive: significant difference is found in the quality of financial literacy in a post-college student as compared to a non-college student

Negative: no significant differences are found in the quality of financial literacy in a post-college student as compared to a non-college student

Hypothesis 2:

Positive: college education has been found to have positive significant influence on financial literacy of college students

Negative: college education has been found to have little or no positive significant influence on financial literacy of college students

Methodology

I will use a comprehensive questionnaire that will cover the main aspects of personal finance including financial literacy on general knowledge, savings and borrowing, investments, and insurance. 1,800 participants from 20 colleges and high schools distributed amongst 10 different states will be asked to answer 52 questions that include 36 multiple-choice questions of their knowledge on personal finance and eight questions of their decisions and opinions. They will also be asked eight question related to demographic data. The survey will be pilot tested and reviewed by two objective individuals who are experts in personal finance. The validity of the survey will be assessed with Cronbach's alpha.

Following Chen and Volpe's (1998) method, responses from each participant will be used to calculate the mean percentage of correct scores for each question, section, and the entire survey. The mean percentage of scores will be grouped into three categories (a) highest -- more than 80% (medium 60%-79% (c) below 60%. In order to achieve as diverse a demographic samples as possible, 900 graduating college students from at least 10 colleges will be sampled.

Similarly, 900 graduating HS students from at least 10 different high schools will be sampled. Colleges will be randomly chosen from 10 different States in America, and similarly too high schools will be randomly chosen from the same 10 different states. In both college and high school, students of the departing, topmost schools will be evaluated.

Characteristics (socioeconomic, race, academic level and so forth) of high schools will be matched to characteristics of universities in order to ensure that as few confounding variables enter the picture as possible.

An ANOVA will be used (since various levels are involved) as well as a logistic regression model (in order to test for possibility of correlation).

In order to assess the extent to which financial literacy impacts and influences decisions of students, students of both high schools and colleges will be asked to rank their personal financial issues using five categories: very important, somewhat important, not sure, somewhat unimportant, and very important. They will also be asked to make decision on related financial issues.

Similarly, in order to evaluate the extent to which high-school or college education influence quality of financial literacy, students of both high schools and colleges will also be asked to rank other certain personal financial issues using these same five categories: very important, somewhat important, not sure, somewhat unimportant and very important. They will also be asked how college helped them make their decision on these related financial issues.