Most American high school seniors don’t know that:
– If their parents lose their jobs, health insurance coverage through their parents’ plan at work may stop regardless of their age.
– Money that may be needed right away in an emergency is better kept in a checking or savings account, or even in stocks, rather than used as a down payment on a house. (Stocks can be volatile but at least they can be sold quickly.)
– Going to a state rather than a private college is not likely to reduce the interest rate on a student loan. But if the parents co-sign the loan or take a second mortgage, or if the federal government insures the loan, the rate is likely to be lower.
– If somebody steals your credit card and runs up $1,000 in charges, your liability is limited to $50 if you notify the card issuer as soon as you discover the theft.
– If your total income is high enough, you may owe federal income taxes on the interest earned from a bank savings account.
– Over the next 18 years, it’s reasonable to expect that stocks will deliver a greater return than a savings or checking account, or a U.S. savings bond.
– A bond issued by a state is not insured against loss by the federal government.
– If a student earns $15,000 a year working part-time while in college, then earns $30,000 a year in her first full-time job, federal income taxes will at least do-uble from when she was in college.
If two young people with a good credit history work at the same company for the same salary, one who borrows $2,500 to buy a car is likely to pay a lower interest rate than one who borrows it to take a vacation, because the car is collateral for the loan.
– Inflation is a bigger problem for older people living on a fixed income in retirement than for young working couples with children (because working people can get raises to offset the higher cost of living).
– If you’re turned down for credit you have the right to check your credit report for free; otherwise, you have to pay.
This picture of American students’ knowledge of financial matters–or rather lack of–emerges from the third and most recent survey by the Jump$tart Coalition for Personal Financial Literacy, a not-for-profit organization based in Washington, D.C.
The survey, underwritten by the Fannie Mae Foundation, consisted of a written 45-minute examination given to 4,024 12th graders in 183 schools across the country, similar to exams given in 2000 and 1997.
The discouraging findings: Students today know even less about credit cards, retirement funds, insurance and other personal finance fundamentals than their counterparts did five years ago.
On average, students in the 2002 survey answered 50.2 percent of 31 multiple-choice questions correctly, a failing grade based upon the typical grade scale used by schools. The average scores in the 2000 and 1997 surveys were 51.9 percent and 57.3 percent, respectively.
“If there’s a bright side, it’s that the situation quantified by Jump$tart’s surveys has caught the attention of Congress, regulators and others,” said Dara Duguay, the coalition’s executive director.
In a speech to the group during the survey’s release, U.S. Treasury Secretary Paul H. O’Neill announced the establishment of the new Office of Financial Education.
“Teaching children how to balance a checkbook should be part of teaching them how to add and subtract,” O’Neill said. “Teaching children about interest is an easy step from teaching the multiplication tables. And reading lessons can easily incorporate financial education. The possibilities are endless.”
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Humberto Cruz can be reached at AskHumberto@aol.com or c/o Tribune Media Services, 435 N. Michigan Ave., Suite 1500, Chicago Ill. 60611.
