We blogged a while back about the sad state of financial literacy in this country. This has been diligently investigated by Annamaria Lusardi and Olivia S. Mitchell, who insert a few financial questions in government longitudinal surveys. Here’s an example.
Suppose you had $100 in a savings account and the interest rate was 2 percent per year. After 5 years, how much do you think you would have in the account if you left the money to grow?
a. More than $102
b. Exactly $102
c. Less than $102
d. Do not know
They are now back with a new paper (co-authored with Vilsa Curto) about financial literacy among American youth. While their findings are perhaps unsurprising, they’re sobering nonetheless:
[F]ewer than one-third of young adults possess basic knowledge of interest rates, inflation, and risk diversification. Financial literacy is strongly related to sociodemographic characteristics and family financial sophistication. Specifically, a college-educated male whose parents had stocks and retirement savings is about 50 percentage points more likely to know about risk diversification than a female with less than a high school education whose parents were not wealthy.
The abstract is here, the PDF here (see Table 2 for the good stuff). I may be crazy for saying so, but I believe financial literacy is one of the most important ingredients for a well-functioning society. If you know of a place — a school system, a government program, even a financial firm’s website — that you believe teaches financial literacy really well (and not just to the young people who, as in the paper above, have financially literate parents), tell us about it in the comments.
and 
. You can also watch it on 
Despite all of the financial advice on TV (some of it pretty good), there are really only a couple of lines to the needed mantra:
Don’t abuse credit.
Save.
The rest of it (including understanding the time value of money) creates the sound basis for those two admonitions
If only they could be pounded in instead of “For Everything Else, there’s Mastercard…”
Suze Orman’s “The Money Book for the Young Fabulous and Broke” was the most helpful to me in learning financial basics.
I’m saving my pennies to send my kids to Money Camp, once they’re old enough: http://www.creativewealthintl.org/aboutus.php
Here’s a link for the paper: http://www.dartmouth.edu/~alusardi/Papers/Financial_literacy_young.pdf
I don’t think there’s much more to it than common sense. There’s no class for buying a house, finding a date, paying bills, fixing your car, or hooking up your TV. Life can’t be taught, it just has to be lived. I think the best we can do is to teach people how to teach themselves.
Ummm…I guess I’ll go with B.
You would definitely have less than $102 because the bank has a minimum funds limit of $200 and charged you $2 per month as a service fee.
I learned this lesson the hard way at age 15 when I found that my savings account(which was opened when I was 5) became subject to service charges and my $100 of birthday and Christmas money quickly became $50.
I didn’t read bank statements at the time… Now I have my account at a credit union where they don’t pull so many shenanigans.
Ouch! And I wondered why so many otherwise smart adults didn’t comprehend that cars cost more to drive than the cost of their gas.