Building Wealth as a Nation
WRIT 391, Spring 2
10 May 2012
Literature Review of Financial Literacy
Building Wealth as a Nation
American adults have not mastered basic economic skills and are considered financially illiterate. When it comes to the financial literacy of America’s young people, the news is equally disturbing. In 2006 former Federal Reserve Chairman Alan Greenspan stated that “our children are financially illiterate and are unable to inherit the global economy unless we start to educate them in elementary school.” Seventy percent of the parent’s surveyed state that most children feel a sense of entitlement and expect to have whatever it is they want, whenever they want it. From more than 46,000 high school students surveyed nationwide in May of 2008, the average financial literacy score was 56%. Gavigan (2010) noted that even with 10 hours of financial literacy training significant change in behavior happens. The challenge is getting a core course incorporated into the school system. Additionally, he lists many curricula that are already tested and available for use, but fiscal constraints strap educators who are reluctant to add more to the curriculum. The need to develop more adult financial literacy education has become more urgent due to the number of people who are now encountering financial distress. Chinen and Endo (2012) investigate how personal finance is affected by age, gender, and education of parents using samples of college students measuring attitudes of financial education while attending high school. Students were from different academic majors and were measured on basic financial education and advanced knowledge. They found a positive correlation of financial literacy and recommended that a basic structure of finance and economy be included as a requirement for high school students. The authors used questions designed to measure financial literacy on general knowledge to support the argument that in today’s society there is an increased demand for financial literacy at younger ages to better prepare people for the future. A multivariable analysis by Lusardi (2010) concluded that there is a difference in financial literacy by gender, ethnic and social background and parental role influences. Teachers’ influence had a small impact on the results but was apparent. There was a direct correlation between level of education of parents and the financial literacy among young adults who also furthered their education; whereas, peer influence happens later in life. There are some limitations to the study but overall conclusions supported the need to incorporate financial literacy within the family unit concentrating on lower income areas. The study did show that parents greatly influence the financial literacy of their children, so a holistic approach is desirable if we are to educate our society as a whole. Ford, Matthew, and Kent (2009) sought answers to several hypotheses: female college students are more intimidated by financial markets than their male counterparts; female college students are less interested in financial markets than their male counterparts; female college students possess less financial market awareness than their male counterparts. An isolated study of 157 undergraduate business students consisting of 81 male and 76 female students focusing on age, GPA, gender, and financial experience was conducted. The results support the hypothesis that woman are less in tune with the market because of risk aversion. Females also exhibited lower levels of rated market awareness, less familiarity with market terms, and less understanding of current market. However, the difference was not significant and further research warranted. Findings did suggest that gender-related differences in market attitudes and awareness extend in some degree to education level and course...