MAKING THE CASE FOR FINANCIAL LITERACY— 2007 A collection of personal finance statistics gathered from other sources. Financial Literacy Education Adults and Parents:
1. A 2007 survey by The Hartford Financial Services Group, Inc. found that: • • • • • The majority of college students say they learn the most about personal finance from their parents, but less than half of students say their parents make a consistent conscientious effort to teach them. Nearly two-thirds (63%) of the parents surveyed say they definitely see personal finance education as their responsibility and consistently make the effort to teach their children about it, compared to the only 41% of students who say their parents did. About 70% of college students cite parents as their primary source of information. Students and parents agree that college students are not well prepared to deal with the financial challenges that lie ahead. Less than one-quarter of students (24%) and only 20% of parents say students are very well prepared to deal with the financial challenges that await them after graduation. More than three-quarters of students (76%) wish they had more help preparing for their financial future.
[The Hartford Financial Services Group, Inc., New Survey by The Hartford Reveals Financial Literacy Communication Gap Among College Students and Parents, February 2007, http://biz.yahoo.com/bw/070412/20070412005060.html?.v=1]
2. The 2006 annual back-to-school survey from Capital One found that: • 49% of teens are eager to learn more about money management, but only 14% have taken a class on the topic - 35% would like to learn from their parents. When asked about the topics they'd most like to learn about, teens express interest in checking accounts, budgeting, investing, saving, and financing for large purchases. Only 18% of parents are discussing back to school budgeting - a decline from the 24% who did so last year. 79% of parents see themselves as positive money role models for their kids, yet only a small percentage are taking advantage of day-to-day learning opportunities to arm their teens with practical money skills. Only 43% of parents have discussed the importance of needs versus wants, compared to 64% who did so last year; and a surprising 42% of parents have not taken any steps whatsoever to discuss financial basics.
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[Capital One, Capital One's Annual Back To School Survey Finds Teens Eager To Learn about Money, But Parents Continue To Overlook Important Learning Opportunities, June 2006, http://phx.corporate-ir.net/phoenix.zhtml?c=70667&p=irolnewsArticle2&ID=882661&highlight]
3. According to a July 2005 survey of 1,000 Parents of High School students by Visa: • • • • • • • Parents rank developing good personal financial skills and being able to handle their money (74%) ahead of both following the wrong crowd (58%) and drugs/alcohol use (56%) in terms of concerns parents have for their children’s futures. Only personal safety ranked higher (89%). 53% of parents agree that their child thinks “money grows on trees.” 76% of parents surveyed said their high school student does not have a budget. Over half of the parents surveyed, 63%, require their working teens to save at least some of what they earn. 88% of parents feel it’s important to monitor their child’s spending and guide their money use. Only 32% of parents said their family will have an itemized back-to-school budget. Some 70% of parents surveyed said their child has not had any formal training in money management, either in school or outside the home. Additionally, 76% said that schools should be required to teach money management skills.
[Visa, Building Teen Personal Finance Skills a Top Worry for Parents, Visa Survey Finds, July 2005, http://www.practicalmoneyskills.com/english/presscenter/releases/080905.php, http://www.practicalmoneyskills.com/english/presscenter/releases/080905_results.php]
4.
A July 2005 national survey by Consumer Action and Capital One found that: • • • • 65.1% of Americans consider themselves "very" or "highly" knowledgeable when it comes to personal finance. However: A majority of Americans (52%) do not regularly review their credit report each year. 23% of Americans have never reviewed their credit report. More than one-third (36.1%) of Americans report that they do not use a budget to manage their family's expenses. Younger Americans are more inclined to use a budget compared to older Americans. Nearly 80% (79.7) of 18-19 year olds use a budget, compared to only 46.6% of Americans aged 70+ (plus).
[Consumer Action and Capital One, National Survey Shows Americans Need to Get Financially Fit; Capital One and Consumer Action Find Majority of Americans Lack Basic Understanding of Credit Scores and the Fundamentals of Personal Finance, July 2005, http://phx.corporate-ir.net/phoenix.zhtml?c=70667&p=irol-newsArticle2&ID=752906&highlight]
Students:
1. An August 2006 poll commissioned by KeyBank and conducted by Harris Interactive found that: • • • • Nearly one-third (32%) of college students, when thinking about their freshman year, admit that they were "not at all" or "not very well prepared" for managing their money on campus. Only one in five (20%) students claims to have been "very well prepared" for managing their money on campus. Three-quarters (75%) admit to having made mistakes with their money when they arrived on campus, and the biggest mistakes were overspending on food (21%), entertainment (19%) and putting too many purchases on their credit card (16%). When asked how closely they tracked where their money was being spent, nearly two in five (39%) claim they had tracked their spending "very closely" while fewer (14%) say they tracked their spending "not at all closely" or "not very closely." Common ways of supporting their spending habits and living expenses in college included getting a part time job (58%) or a full-time job (24%).
[KeyBank and Harris Interactive, One-Third of College Upperclassmen Admit Being Financially Unprepared as Freshmen, August 2006, http://www.harrisinteractive.com/news/allnewsbydate.asp?NewsID=1108]
Other:
1. The Consumer Bankers Association’s 2005 Financial Literacy Survey found that: • • • Bank participation in financial literacy programs for college students dropped in 2005, falling to 36% of survey respondents from 50% last year. In 2005, the vast majority of participating banks (81% of these banks) participated in college-based literacy efforts exclusively through partnership with external entities, with only 6% of respondents exclusively running proprietary programs, and 13% participating through both proprietary programs and partnerships. Survey results show that 47% of banks rely exclusively on curricula developed by other organizations, such as FDIC’s Money$mart curriculum, rather than develop their own. Nearly 30% of banks utilize both thirdparty and proprietary curricula, and only 24% exclusively utilize their own. In 2004, 66% of banks used outside curricula; 34% used their own.
[The Consumer Bankers Association, CBA’s Financial Literacy Survey Shows Efforts Aimed at Explaining Credit Scores and Underwriting Process, 2005, http://www.cbanet.org/news/Press%20Releases/Financial_literacy/FinLitStudy05.htm, http://www.cbanet.org/news/Press%20Releases/Financial_literacy/FinLitStudy05.htm]
American Kids & Teenagers
1. A January 2006 Weekly Reader Research/AICPA survey revealed: • • • • • • • • 56% of 9-12 year olds earn a weekly allowance, mostly by doing household chores; the average allowance among this group is $7.35. More than half (53%) have savings accounts, and 47% said they have plans for saving and spending their money. When asked what they would do if given a gift of $100, 59% of children between the ages of 9 and 12 said they would save at least $50. 56% said they are putting money away for college. Only 18% of these children spend all their allowance. 18% of 12-year-olds have a job outside the home. 24% of "tweenagers" report that their parents force them to save. 31% said their parents discuss finances with them; high on the list of financial topics are bills, budgets and the cost of education.
[Weekly Reader Research and the AICPA, Tweens Savvy About Savings, Weekly Reader Research/AICPA Survey Shows, January 2006, http://biz.yahoo.com/prnews/060213/nym226.html?.v=36]
2.
According to The TRU Study, a teen marketing and lifestyle survey published by Teenage Research Unlimited in December 2005: • Teens are projected to spend $159 billion in 2005. The figure represents a projection of total teen spending for 2005, including teens’ own cash and others’ money that they spend—typically their parents’. Although teens’ overall spending level registered a 6% decline from one year ago, most 12- to 19-year-olds reported spending just as much of their own money in 2005 as they did last year. In fact, nearly all of the decrease seems to stem from less access to other people’s money.
[Teenage Research Unlimited (TRU), TRU Projects Teens Will Spend $159 Billion In 2005, December 2005, http://www.teenresearch.com/PRview.cfm?edit_id=378]
Undergraduate & Graduate Students
1. The Student Monitor Lifestyle & Media Spring 2006 Financial Services Study of college undergraduates found that: • • • • • • • 78% of students work in the summer, 55% during the school year 68% get money from home averaging $285 monthly 40% (down from 44% last year and 53% three years ago) have a credit card in their own name Average student cardholder has 1.2 cards (79% have one card, 19% two cards, and 6% three or more cards) Nearly two thirds (63%) acquired their first credit card before age 19 (87% freshmen compared to 51% among seniors) 87% believe they were “Very/Somewhat” prepared for the responsibility of having a credit card while 53% say they did not receive enough credit education from the issuer of their first card Half (50%) believe the “process of identifying ways to pay for college to be complicated and confusing” while 43% believe their school’s financial aid office was “helpful in identifying ways to pay for college”
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Parents (77%) are the most influential source of information of how to pay for college followed by “school’s financial aid office” (42%) “Money from parents” represents the largest share of college funding (42%) while loans (federal, state, direct from school and for profit sources) represent 24% of college funding 62% expect to have a student loan debt averaging $27,236 ($101 billion nationally) and requiring 7.9 years to pay off and 62% expect to consolidate their student loans
[Student Monitor Lifestyle & Media Spring 2006 Financial Services Study, March 2006, http://www.studentmonitor.com]
American Families Saving & Investment:
1. According to a March 2007 poll conducted by Harris Interactive for the American Institute of Certified Public Accountants (AICPA): • • Only 14% of American adults mentioned their company's 401(k) plan when asked about ways they save. Only 11% of workers under 35 years of age indicate they are participating in their company's 401(k).
[Harris Interactive for the American Institute of Certified Public Accountants (AICPA), American Adults Still Expect to Retire With a Pension, According to AICPA, March 2007, http://biz.yahoo.com/prnews/070410/nytu081.html?.v=85]
2.
The August 2006 survey of America's IQ on personal finance from Consumer Action and Capital One found that: • • 65% use budgets regularly - a positive sign and slight improvement from last year (64%). 66% report that they maintain the budgets they create, compared to only 60% last year.
[Consumer Action and Capital One, Second Annual Survey of America's ''Financial IQ'' Shows Americans Still Need a Dose of Fiscal Fitness, August 2006, http://phx.corporate-ir.net/phoenix.zhtml?c=70667&p=irol-newsArticle2&ID=912626&highlight]
3.
A March 2006 Wall Street Journal Online/Harris Interactive Personal Finance Poll reveals:
• •
Most (97%) U.S. adults who are the parent or legal guardian of a child 18 years of age or younger expect their oldest child in this age range to attend college, and nearly eight in 10 (79%) of these parents expect to pay for some or all of their child’s college education. 11% expect to pay less than $5,000, 17% expect to pay $5,000 to $9,999, 39% expect a bill of $10,000 to $29,999, while another 16% expect to pay $30,000 or more. However, a quarter (26%) of parents who say they expect to pay for some or all of their child’s college education say they have saved less than $5,000 and a third (32%) haven’t saved anything specifically for that purpose.
[Wall Street Journal Online/Harris Interactive, Majority of Parents Have Set Little or No Money Aside to Cover Children’s College Costs, according to New National Survey, March 2006, http://www.harrisinteractive.com/news/allnewsbydate.asp?NewsID=1037]
4.
A November 2006 nationwide Pew Research Center telephone survey reveals: • Nearly two-thirds (63%) of Americans acknowledge they don’t save enough, and more than a third say that they often (11%) or sometimes (25%) spend more than they can afford. More than one-in-three (36%) Americans also say that they have at some point in their lives felt their financial situation was out of control. The U.S. Commerce Department’s Bureau of Economic Analysis has estimated that, since April of 2005, the American public has been spending more money than it has earned after taxes—an unprecedented development in the past half century.
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[Pew Research Center, We Try Hard. We Fall Short. Americans Assess Their Saving Habits, November 2006, http://pewresearch.org/pubs/325/we-try-hard-we-fall-short-americans-assess-their-saving-habits]
Debt:
1. Revolving consumer credit set a new record of $879 billion in January [2007], growing at an annual rate of 1.1%. Based on revised figures, revolving debt rose 1.9% in December and 13.8% in November. According to data released by the Federal Reserve, total revolving credit grew $800 million during January to $879.4 billion. Bank credit card debt (excluding store and gas credit cards) at the end of the fourth quarter was about $750 billion or roughly 85% of total revolving credit, according to CardData (www.carddata.com). At the end of January, Americans were $2411.4 billion in debt, excluding home mortgages.
[CardWeb.com, Jan Debt, March 9, 2007, http://www.cardweb.com/cardtrak/news/2007/march/9a.html]
2.
U.S. consumers received nearly 8.0 billion direct mail credit card solicitations last year, a 30% increase over the prior year. The gain was about double the growth rate of 2005 even though response rates are hovering at 0.3%, according to CardWatch (www.cardwatch.com). Response rates have declined from 2.8% fifteen years ago to 1.2% ten years ago to 0.6% five years ago.
[CardWeb.com, Orvis Card, February 21, 2007, http://www.cardweb.com/cardtrak/news/2007/february/21a.html]
3.
A recent survey by Sallie Mae found that more than half of college students accumulated more than $5,000 in credit card debt while in school. Of the 13,000 respondents, one-third piled on more than $10,000 in credit card debt while in school. Only 19 percent said they did not acquire any credit card debt while in school.
[Sallie Mae, Sallie Mae launches new ‘Be Debt Smart’ campaign to educate students, parents and graduates on managing debt and understanding credit, January 2007, http://www.salliemae.com/about/news_info/newsreleases/021407_bedebtsmart.htm]
4.
According to a November 2005 Credit Card Survey conducted by Myvesta, the average amount of credit card debt carried by individuals has declined by 11.4%. The average American is now carrying $2,328 in credit card debt, down from $2,627 in 2004. Individuals also haven't added any new credit cards to their wallets in the past year. Americans still hold an average of 2.9 cards each, the same as in 2004.
[Myvesta, Myvesta Survey Shows Americans Paring Down Credit Card Debt, November 2005, http://myvesta.org/news/releases/122905PRCreditCardSurvey2005.htm]
Bankruptcies, Defaults, & Foreclosures:
1. Total bankruptcy filings jumped by 9.8% in the third quarter [of 2006] compared to the prior quarter, but, remain well below year ago levels. During the third quarter total filings hit 171,146 compared to 155,833 for the second quarter and 542,002 one-year ago. According to the Administrative Office of the U.S. Courts filings for the 12-month period ending September 30th, fell 37.6% to 1,112,542. Non-business or personal bankruptcies fell 37.9% for the same period while business bankruptcies declined 20.1%. The record filings last year were part of the surge in filings prompted by the October 17, 2005 implementation of the "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005." However, this week MA-based Global Insight said it expects U.S. corporate bankruptcies to increase by 17% in 2007. The majority of these increases are expected to occur in the metals, mining, and energy sectors, as well as in real estate and closely related industries, such as mortgage banking and residential construction.
[CardWeb.com, Bankruptcy Pulse, December 8, 2006, http://www.cardweb.com/cardtrak/news/2006/december/8a.html]
Updated April 2007