Filed under: personalfinancenewsss.wordpress.com | Tags: English, generation, Next, Please
How well-equipped are young people to deal with the next financial and economic crisis — as opposed to the current one?
Not very, according to a study by experts in a new paper issued by the National Bureau of Economic Research: ?Financial Literacy Among the Young.?
Annamaria Lusardi of Dartmouth, Olivia Mitchell of the Wharton School of the University of Pennsylvania and Vilso Curto of the NBER found only 27% of young adults — 23 to 28 years old — could correctly answer three questions to determine their understanding of interest rates, inflation and risk diversification.
When the answers were sorted by gender, race, ethnic background and education level, the researchers found ?financial illiteracy is not only widespread, but is particularly acute among specific groups such as women, Blacks, Hispanics, and those with low educational attainment.?
The results are important, they said, because ?people with low financial literacy are more likely to have problems with debt, less likely to participate in the stock market, less likely to choose mutual funds with lower fees, less likely to accumulate wealth and manage wealth effectively and less likely to plan for retirement.?
The three questions posed to the 7,138 young adults in the survey were (answers at bottom of story):
Suppose you had $100 in a savings account and the interest rate was 2% per year. After five years, how much do you think you would have in the account if you left the money to grow: more than $102, exactly $102, or less than $102. Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After one year, would you be able to buy more than, exactly the same as, or less than today with the money in this account?Do you think that the following statement is true or false? ?Buying a single company stock usually provides a safer return than a stock mutual fund.?
In addition to the suggested answers, respondents could also opt for ?do not know? or choose to not answer.
While 80% of the respondents answered the first (interest rate) question correctly, only 54% got the second (inflation) question right and 47% knew the answer for the third (risk diversification) question.
The future implications of financial illiteracy are significant, the paper said, because young adults have high debt burdens — between 1997 and 2007 the average undergraduate student loan debt grew from $9,250 to $19,000 — and the debts loads are influencing other life decisions.
?These debt loads are of particular concern,? the paper said, ?given recent evidence that young people may lack sufficient knowledge to successfully navigate their financial decisions.?
Equally disturbing as the percentage of respondents who did not answer correctly: the high percentage of respondents who answered ?do not know? for the third question — 38%.
?The large ?don?t know? response,? the authors said in the paper, ?was particularly troubling as previous research has found that ?don?t know? answers identified respondents with very low levels of financial knowledge.
?In any case,? they added, ?the low correct response rates, particularly to the inflation and risk diversification questions, indicated that many young people lack knowledge of basic financial concepts.?
The lack of knowledge appears to be cumulative: ?those able to answer one of the financial literacy questions correctly were also more likely to answer the other questions correctly.
According to the researchers, the demographic characteristics too are disturbing.
?Young women are now more likely to have a college degree than men and participate actively in the labor market, yet their level of financial literacy remains very low.?
Men outscored women 82.2% to 76.7% on the first question, 60.1% to 47.8% on the second and 53.3% to 40.1% on the third.
Lusardi said in an interview the gender difference uncovered in her research actually surprised her, but she also noted another difference: ?women are more likely to say ?I don?t know? than men.? She said because of the greater role women play in society, different programs are required to address their ?illiteracy.?
The study found family circumstance have a great influence on the degree of financial literacy with children of parents with higher education levels more likely to have answered the questions correctly. But, there were other influential characteristics:
Young people who came from homes where parents attended religious services regularly were more likely to answer the questions correctly — particularly the inflation and risk diversification questions.Respondents who had never smoked had a greater percentage of correct answers.
According to Lusardi, attending religious services regularly suggests a more social family atmosphere, which would lead to a broader circle of peers and information sources.
Smokers, she said, generally give less weight to the future than non-smokers, and are less likely to save or invest.
The study suggested ?researchers and policymakers alike would benefit from gathering information on financial literacy; often-used indicators thought to proxy for financial literacy, such as education, do a poor job of measuring respondents? financial knowledge.?
According to Lusardi, the important word is ?literacy, not financial? in the study.
She said there needs to be a single reputable source for financial information and suggested the central bank, is perfectly suited to fill this role.
Answers: 1.) More 2.) Less 3.) False
Mark Lieberman is the senior economist for the FOX Business Network. Prior to joining FOX, he served as first vice president and manager of economic analysis and research at Washington Mutual in New York. Before that, he served as senior vice president at Dime Savings Bank of New York (which was later acquired by Washington Mutual), where he specialized in credit and risk management. He is a member of the Executive Committee of the New York Association for Business Economics. He has a degree in Economics from the Wharton School of the University of Pennsylvania. (more…)
Filed under: personalfinancenewsss.wordpress.com | Tags: Could, doing, What
Last weekend I was invited to be a guest at a Hall of Fame dinner for a high school in New Jersey. I used to cover the softball team as a sports writer and I was honored to be included in the celebration when its state championship team of 19 years ago was being inducted.
Back then it had never occurred to me to become a life coach because I had never heard of the profession. Plus, I was very happy with what I was doing. And yet, when people who I hadn?t seen in nearly 20 years heard that?s what I?m doing now, they nodded like it was a natural. The head coach revealed that my positive coverage of the team helped motivate her, made her feel she could do it.
Stunned, all I could say was, ?Wow, thank you.? But upon a few days of reflection, I realized this was a valuable lesson in how our natural and/or cultivated skills can transfer from one job to a seemingly unrelated one. It?s not always about what your degree is in, what the logical progression ?should? be according to societal dictate, or how many words per minute you can type.
Apparently, my ability to motivate was emerging back then and I didn?t even know it. Not to mention that one of my assets as a sports writer was getting my subjects to open up after games; now that skill is applied to clients who need to feel comfortable in order to succeed in the coaching relationship.
I know many of the unemployed folks out there have become understandably discouraged or even desperate. Many career coaches are all about the networking mantra and, of course, that?s a good idea no matter what. But let?s shake it up. Some of you — and not just the unemployed, by the way — need a radical change. If you?re already frightened and unable to find a job, why not take a plunge now?
I suggest these thoughtful actions as a way to put your finger on the possibilities and I will be thrilled if even one person reading this has a light bulb moment because of them.
~ First, look at your resume a little differently. If you?re seeking a job in the field you?ve been in for a while, it?s a powerful tool. But if you?re looking to make a change, it can keep you in a box in your own mind. I have been fortunate in that I?ve come across some flat-out visionary people in my career, one of whom decided that instead of losing me to budget cuts in the Web department at our television network, she would translate my ?strong editorial skills and knack for telling a story? to television producing. I didn?t have a lick of experience in it and yet there it was, a golden opportunity, in New York City no less. I confess that had it been reversed, had I been seeking a TV producing job, I wouldn?t have had the forethought to express my talents in that way. What is on your resume that translates into something different? What might you be missing?
~ That leads nicely to my next suggestion: Listen to other people when they tell you you?re good at something. This has been the story of my career. And I?m not just talking about that aforementioned executive producer. A journalism professor sought me out when he saw my articles in the college newspaper. A life coach at an organization where I was doing volunteer work told me I?d be a terrific life coach. These people planted seeds that turned into major career tracks.
~ This may sound like a contradiction, but stop listening to people! Of course in this case I mean people who might be well-meaning but are misguided about what?s best for you. In this category are suggestions of careers they themselves would have liked but didn?t have the courage to pursue. Or, despite the fact that you nearly failed every science class you?ve ever had, they tell you a particular field in medicine is the place to be because there are lots of jobs. That is spot-on advice for someone who actually likes science, but doesn?t really line up with your near-savant knowledge of Russian literature.
~ Make an exhaustive list of jobs that intrigue you and work your way through researching each one. I had a client do this and his list included urban planner, librarian and rabbi, among others. He was a business journalist at the time and has now earned a masters degree in library sciences. This came about largely because he spent a day with a friend who worked in a major city library and he saw the possibilities. Kind of a natural for a guy who loves Trivial Pursuit, right?
I?m telling you that there?s something you love to do, something you?re passionate about, that?s eluding you and could dramatically improve your life. You owe it to yourself to put your finger on it.
Nancy Colasurdo is a practicing life coach and freelance writer. Her Web site is www.nancola.com. Please direct all questions/comments to FOXGamePlan@gmail.com. (more…)
Filed under: personalfinancenewsss.wordpress.com | Tags: Education, Goals, madness, Parenting
My mother was livid the day I came home from school as an eighth grader and related that Mrs. DiGiuseppe told us that some people believe President John F. Kennedy isn?t really dead.
?His wife had his brain matter all over her lap,? my mother said, indignant.
She went on to explain that President Kennedy was indeed dead and that what we had learned was a conspiracy theory. I understood and we continued on with our lives. She didn?t pull me out of school or make a big stink at the next PTA meeting or make a national movement out of it. She parented me.
Go figure.
I grew up in a Catholic family, where we were taught the world began with Adam and Eve. Then in science class we learned about evolution. This did not faze my parents, both of whom, by the way, are conservatives. They had better things to do than thwart our education, like support us, teach us right from wrong, respect for elders, and work hard for what you want in life.
The latter, incidentally, is the message imparted to schoolchildren this week by Barack Obama, who last I looked was President of all the people in our fine nation. To suggest, as so many citizens have, that he shouldn?t speak to American children is just absurd. No one is going to agree with him 100% on the issues, but this is a valuable, if generic, message.
How very sad that it has come to this. So little respectful disagreement anymore, just vitriol and petty behavior.
As a life coach, I am thrilled by an idea posed by the United States Department of Education in its suggested activities after the speech — have the children write letters to themselves about how they can achieve their short-term and long-term education goals. First of all, this is a device I use for my adult clients and they love it. Second, I would have welcomed this assignment as a student because I had education goals and ambition that were mostly frowned upon for girls in the Italian-American culture. So I can?t help but imagine just one aspiring, starry-eyed kid being validated by our nation?s leader making it all worth it.
As for the dissenters. I can hear the dinner table talk over the next week.
?Honey, did the mean man in the suit tell you that you can do anything you put your mind to??
?Yes, mom. But he didn?t seem mean. And guess what? I told him I want to be a fireman. He smiled and told me it was a great idea.?
?He did, did he? A fireman? Over my dead body you?ll be a fireman.?
?But mom ??
?I won?t have some socialism-preaching politician telling you what you can and can?t be.?
?But mom ??
?Never mind. You just forget all that.?
?I can?t, mom. I already started writing my letter with my goals. That?s my goal.?
?What? Let me see that letter. We?re throwing it in the garbage and starting over.?
?But what will I write??
?I don?t know. Why do you need to write one in the first place??
?It?s our homework. My teacher said President Obama said it would help.?
?What does he know? He doesn?t know what?s best for you. I do.?
?But mom ??
?Honey, drop it. We are closed to opinions that don?t agree with ours. Especially from mean men.?
Welcome to the madness that is now our country.
I am all the more thankful for Lucille and John Colasurdo.
Nancy Colasurdo is a practicing life coach and freelance writer. Her Web site is www.nancola.com. Please direct all questions/comments to FOXGamePlan@gmail.com (more…)
