Recently the results of the first ever assessment of the financial literacy of the world's teen population has just been issued by the Programme for International Student Assessment (PISA). PISA's triennial international survey's goal is to evaluate education systems in countries around the world through testing the skills and knowledge of 15-year-old students. The most recent results come from the 2012 assessment. According to the outcome 15-year olds in the United States ranked only average in their financial abilities and knowledge.
The PISA assessment sadly ranked United States teens as only average in their knowledge of finance.
According to the PISA assessment "United States ranks between 8th and 12th place in 15-year-olds' aptitude in planning and managing finances, dealing with bank accounts and monetary transactions, understanding taxes and savings, managing risks and rewards, and comprehension of consumer rights and responsibilities in financial contracts."
With the United States' teens ranking behind it is evident that financial literacy training is needed to begin at a young age in order to promote the importance of being financially responsible. Using the study's findings, as well as the state of U.S. financial literacy, NEFE stresses the importance to begin the discussion to teach parents and children how to gain financial literacy.
As director of NEFE Paul Golden is the perfect person to aid in furthering financial education to the United States' teens and their guardians. Golden is eager to discuss what the study had revealed and realizes the importance of getting parents involved in teaching their teens to be financially responsible.
I questioned Paul Golden, Director for NEFE, in an interview asking his thoughts and advice for advancing the financial literacy of America's children and teens.
According to the PISA findings "More than one in six students in the United States – 17.8% compared with 15.3% across OECD countries – does not reach the baseline level of proficiency in financial literacy. At best, these students can recognize the difference between needs and wants, can make simple decisions on everyday spending, and can recognize the purpose of everyday financial documents such as an invoice." The study goes on to reveal "Only about one in 10 students in the United States is a top performer... who can look ahead to solve financial problems or make the kinds of financial decisions that will be relevant to them in the future."
NEFE is the perfect organization to come to the rescue. It is time to get the younger Americans on the right track to learning how to be financially literate in order to stay and have financially security as a nation in the future. Paul Golden is eager to help.
First I wanted Golden to answer "How did you begin your own road to becoming a financially responsible expert?"
He explained "With background in journalism I put himself through school by working in finance". He went on to say I always felt like he was counseling people but was at odds working at a commercial bank that wanted me to sell to people products who could not afford them.
Working with NEFE for the past ten years has become a perfect fit for Golden, as he put it "Very interesting going from a banking perspective to working with NEFE to actually help people." Going on "After recession there was an important need to get people financially responsible and not become complacent again".
I queried Golden "What are your thoughts on the PISA study and the state of financial literacy among American teens?"
Golden replied "CEO Ted Beck thought we would do a little better." adding "It is good because it is the first time it has been checked. Now we have a base line in order to see if we improve or decline".
Following up Golden allowed "We want the 15 yr olds to learn competence in being financial responsible" and likened the teaching to getting initial shots and then boosters at the Doctor with "The teens need to have initial "inoculation" in high school and then get "booster shots" along the way to become and stay financially responsible".
Furthering his thoughts Golden spoke "If parents don't feel confident about managing money, they question 'how can I talk to my kid about it', and now we have learned that teachers don't feel comfortable teaching about it". Golden stated "We need to overcome teacher capability and then make a plan on how we are going to teach the kids about money... We have learned that we have a lot more challenges in our society".
I wanted Golden's expert advice asking "At what age should parents begin teaching children about finances and money?"
First explaining "Parents are less likely to communicate with kids when they don't communicate as a couple about finance" Golden then stated that "Fundamental concepts can be learned as early as 2 to 3 years of age and ages 5 to 7 is the perfect time to teach about saving and spending.
Golden believes "An allowance is an important tool... Let kids make mistakes spending and running out or use the allowance to teach them how to save some money for the future". He further stated the importance of teaching "Need vs. want, do you really need this or is it just something you want that will waste your money".
I asked of Golden "What are some of the best tools for teaching teens about money?"
Golden was proud to answer this question explaining "NEFE has a free program made available for teachers to use". Even with all of the technology he stated "Pencil to paper curriculum is the preferred way to teach about money management".
Additional programs are very helpful in teaching about money with Golden mentioning "FDIC has money smart program, the Stock Market game, Smartaboutmoney.org". Golden mentioned how "Teachers can pull in a suite of programs to teach a foundational knowledge". After a foundation Golden says 'Financial learning continuously needs to be reinforced".
Excited, Golden mentioned "Through JumpStart coalition we are starting a teacher training pilot program for 2 to 3 day training on how to deliver personal fiance training in a turn-key program. This will reinforce teacher comfort level in teaching about financial literacy as part of the education".
Golden stated that there are five parts to teaching about financial responsibility.
- Needs to be provided by well trained educators.
- Needs to be vetted material
- Needs to be relevant subject matter; core knowledge'
- Needs to be timely; needs to grow with students
- Needs to have an evidence of impact; to be evaluated with a pre and post test assessment in order to see base line and improvement levels. The behavior shift needs to be constantly evaluated to see if the knowledge teens learn become behavioral.
He mentioned "Cashcourse.org is a site specifically for college students and young adults transitioning into the real world. 800 colleges are using it now."
As an expert I asked Golden "What are some financial management tips you can offer families with students heading into college and beyond?"
"Communication is the biggest thing" Golden answered explaining "Fears parents have are about the child exercising independence." Golden stated the importance of children having "Positive role modeling before going off to college... Parents need to open accounts with kids before heading out to school. Parents needs to be on account with kids in order to help them learn to manage".
As Golden detailed "Parents need to engage frequently about finances with kids and explain that credit cards need to be used responsibly". He spoke "Once outside of the nest it is even more important to communicate with the kids about money and not accumulating debt".
Being proactive I questioned "What are some of the pitfalls younger adults commonly experience when out on their own?"
Immediately Golden answered "Credit is the big one... Basic spending decisions like overdrawing account. Be aware when out with friends and buying for everyone when you can't afford it". He also explained "Taking out too many student loans and not using it for education; using it to travel or buy a car instead is one way to get one's self into financial trouble".
I wished Golden to give me his thoughts on "How can the new adults avoid the dangers that come with money mismanagement?"
Golden spoke about using college as a learning tool starting with asking one's self "What is the realistic income that one is studying for against the amount of the student loan I am going to take". He discussed how students should "Look for more scholarships and funding opportunities instead of loans".
He stated the importance that "They need to learn independence and not have parents support them when out of college and in the real world working... and parents need to help by charging a percentage of the young adult's income for rent if the kids need to move home. Parents can always put the money in an account that can be given as a surprise to them later when they are ready to move out".
Most important, Golden says "Establish a solid relationship between parent and child so they feel comfortable coming to the parent for advice in making good decisions". As Golden mentioned "You never know when things could "go south", like a health crisis or a company going under, that can throw you totally off financially. We need to learn about planning for the future and communication makes so much difference".
The recently published PISA results are from the 2012 assessment.
The PISA 2012 assessment of reading, mathematics and science representing about 28 million 15-year-olds globally. Of those economies, 44 took part in an assessment of creative problem solving and 18 in an assessment of financial literacy. Approximately 510,000 students in 65 economies took part in the 2012 assessment. As of this date more than 70 economies have signed up to take part in the 2015 assessment which will have a focus on science.
This PISA assessment is a wake-up moment for the United States. With the worlds' economies in crisis it is important to teach the younger Americans how to take care of their own financial responsibilities and futures in order for the future outlook of the United States and its inhabitants to thrive financially.
Literacy is the most important proponent to learning any subject. Financial literacy is necessary for one to grow into a self sufficient adult. Learn proper money management; never be afraid to dance.
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