THE FINANCIAL LITERACY OF YOUNG AMERICAN ADULTS Results of the 2008 National Jump$tart Coalition Survey of High School Seniors and College Students By Lewis Mandell, Ph.D. University of Washington and the Aspen Institute For the Jump$tart Coalition® for Personal Financial Literacy THE JUMP$tart Coalition FOR PERSONAL FINANCIAL Literacy 919 18th Street, N.W. Suite 300 Washington, DC 20006 Phone: (888) 45-EDUCATE ● F ax: (202) 223-0321 E-mail: [email protected] THE FINANCIAL LITERACY OF YOUNG AMERICAN ADULTS - 2008 Mandell Lewis Mandell 1 THE FINANCIAL LITERACY OF YOUNG AMERICAN ADULTS TABLE OF CONTENTS Page Acknowledgements ..................................................................................................................4 Executive Summary .................................................................................................................5 Chapter 1 – The Financial Literacy of Young American Adults………………………… 7 Background – The 1997-98 Baseline Survey .............................................................7 Results of the 2000 Survey ..........................................................................................7 Results of the 2002 Survey ..........................................................................................7 Results of the 2004 Survey ......................................................................................... 8 Results of the 2006 Survey ..........................................................................................8 Results of the 2008 Survey ..........................................................................................8 High School Results .........................................................................................8 College Results .................................................................................................8 A Description of the 2008 Surveys…………………………………………………. 9 The High School Sample .................................................................................9 The High School Survey Instrument ............................................................10 The College Sample ........................................................................................10 The College Survey Instrument ....................................................................10 The Jump$tart Coalition ...........................................................................................11 Chapter 2 – The Overall Financial Literacy of High School Students .............................12 Test Results by Background .....................................................................................12 Results by Aspirations ...............................................................................................15 Results by Money Management Education and Perceived Knowledge ................17 Classes at School ............................................................................................17 Who Takes a Full Semester of Money Management or Plays a Stock Market Game? ................................................................................................18 Results by Money Management Experience .............................................................20 Credit Card Use .............................................................................................20 ATM Card Use ...............................................................................................21 Paying for Car Insurance ..............................................................................21 Bank Accounts ................................................................................................21 Security Ownership .......................................................................................21 Employment History ......................................................................................21 Home Ownership ...........................................................................................21 Results by Subject Category .....................................................................................24 Subject Expertise by Money Market Experience........................................24 Subject Expertise by Money Management Education and Perceived Knowledge .............................................................................27 Chapter 3 – The Overall Financial Literacy of College Students .....................................29 Overall Results ...........................................................................................................29 2 The Financial Literacy of Young American Adults Test Results by Background .....................................................................................31 Test Results by Money Market Education ..............................................................32 Test Results by Financial Behavior ..........................................................................33 Subject Results ...........................................................................................................37 Chapter 4 – Understanding Income .....................................................................................41 Introduction ................................................................................................................41 The Importance of Education, Skills and Location ................................................41 Question 24 .....................................................................................................41 Question 18 .....................................................................................................48 Question 21 .....................................................................................................54 Sources of Income ......................................................................................................60 Question 14 .....................................................................................................60 Anticipating Taxes and Other Deductions ..............................................................66 Question 13 .....................................................................................................66 Question 7 .......................................................................................................73 Question 2 .......................................................................................................80 Chapter 5 - Understanding Money Management ...............................................................86 Financial Goals and Plans .............................................................................86 Question 8 .......................................................................................................86 Question 1 .......................................................................................................92 Understanding Insurance ..........................................................................................98 Question 26 .....................................................................................................98 Question 22 ...................................................................................................104 Question 17 ...................................................................................................111 Chapter 6 - Understanding Savings and Investment ........................................................117 Budgeting to Save .........................................................................................117 Question 10 ...................................................................................................117 Short and Long-Term Savings and Investment Strategies ..................................123 Question 16 ...................................................................................................123 Risk, Return and Liquidity .....................................................................................129 Question 3 .....................................................................................................129 Question 11 ...................................................................................................135 Question 9 .....................................................................................................143 Question25 ....................................................................................................149 Impact of Taxes and Inflation on Savings and Investment Decisions .................155 Question 31 ...................................................................................................155 Question 4 .....................................................................................................161 Chapter 7 - Understanding Spending and Debt ................................................................167 Spending Now Versus Later ...................................................................................167 Question 5 .................................................................................................................167 Transaction Instruments .........................................................................................172 Lewis Mandell 3 Question 27 ...................................................................................................172 Question 20 ...................................................................................................178 The