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Financial Literacy: If It’s So Important, Why Isn’t It Improving?

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  • Lewis Mandell

Abstract

Financial literacy has assumed greater importance in our society as the result of the increasing complexity of financial products and the simultaneous cutting of economic safety nets by government, employers and even parents who worry about their own retirements. If the problem isn’t solved and consumers don’t look out for themselves, they may exercise a 'put option' by throwing themselves on the mercy of taxpayers when they cannot support themselves in retirement. In addition, a lack of financial literacy may contribute to seemingly 'irrational' behavior that distorts financial markets. Measured financial literacy scores among high school seniors is low and has even declined since 1997. More distressing is the fact that students who take a course in personal finance end up no more financially literate than those who don’t. Tracking students who took such a course over a 5 year period shows no positive impact on financial literacy, attitudes toward thrift or behavior. The only bright spot is the stock market game which consistently increases literacy scores, indicating that teaching should be interactive, contemporary and 'fun.'

Suggested Citation

  • Lewis Mandell, 2006. "Financial Literacy: If It’s So Important, Why Isn’t It Improving?," NFI Policy Briefs 2006-PB-08, Indiana State University, Scott College of Business, Networks Financial Institute.
    • Handle: RePEc:nfi:nfipbs:2006-pb-08
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    File URL: http://www.indstate.edu/business/sites/business.indstate.edu/files/Docs/2006-PB-08_Mandell.pdf
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    Cited by:

    1. Şenol, Doğaç & Onay, Ceylan, 2023. "Impact of gamification on mitigating behavioral biases of investors," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).
    2. Singh, Ardhendu & Venkataramani, Bhama, 2012. "Financial Education: Institutes of Higher Education as delivery channels," MPRA Paper 43336, University Library of Munich, Germany.
    3. Castleman, Benjamin L. & Patterson, Richard & Skimmyhorn, William, 2020. "Benefits left on the table: Evidence from the Servicemembers’ Civil Relief Act," Economics of Education Review, Elsevier, vol. 78(C).

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