Across My Desk

Ask most adults where they learned about saving, investing and money management and they're likely to say at home. Talk with today's teens and you'll find out there's plenty of room for improvement.

A recent study, commissioned by the Charles Schwab Foundation in partnership with Boys & Girls Clubs of America, probed teens, ages 13-18, for their definitions of financial literacy, their understanding of important concepts in money management, and their beliefs about who should bear responsibility for teaching them money management.

Highlights of the study include:

--Only 17 percent of survey respondents said they were very or extremely knowledgeable about how to manage debt;

--Fewer than a third (28 percent) are extremely or very knowledgeable about creating a budget;

--Only a little more than a third (36 percent) are extremely or very knowledgeable about how to open a savings account;

--And only 10 percent understand the power of compounding, one of the most fundamental concepts in investing. When asked to define the term "financial literacy" in their own words, the majority of respondents (79 percent) could not. Several answers to this open-ended question, in fact, further underscore the urgency for more financial education:

--"I feel it means money for learning to read."

--"I think it's advanced English."

Concerning responsibility for teaching this important subject:

--More than two thirds (67 percent) of teens believe their parents or guardians should be most responsible for teaching them about managing money.

--Eighty percent believe money management should be a requirement in high school.

The survey polled a national sample of teens as well as a separate sample of teen members of Boys & Girls Clubs across the country. . Telephone interviews were completed among a national listed sample of 250 males and 250 females.

The Boys & Girls Clubs sample included teens who had completed a financial literacy program (called Money Matters: Make It Count), as well as those who had not.

(Source: Schwab Report 4/05)