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Leah Bittner

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K-12 Personal and Business Finance Study

This study is the product of a Federal Congressional Earmark Grant funded through the Southwest Initiative Foundation and written by Southwest West-Central Service Co-op. Completed in September 2007.

k12 Counties

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Secondary Sources

Executive Summary

In an effort to determine the level of proficiency of K-12 students regarding basic business and financial knowledge, a total of 32 school districts in southwest and west-central Minnesota responded to a survey designed for this purpose. The results of this study support results of other similar studies indicating a deficiency regarding financial literacy in K-12 education. Amongst the 32 school districts participating, the average correct score was 59 percent.

Financial literacy issues are becoming more and more part of the discussion regarding the health of our nation. We find ourselves in a time when government spending exceeds its resources and this trend has trickled down to the spending habits of its citizens.

According to a Roper Poll commissioned by the American Institute for Certified Public Accountants (AICPA), 43 percent of Americans live above their means, spending $1.22 for every dollar they earn. In 2003, 1.6 million Americans filed for bankruptcy, a number that has doubled since 1993 (360 Degrees of Financial Literacy, 2004).

Rigorous educational efforts focused on basic financial understanding would be a first step in correcting the present direction of consumer spending in this country.

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Recommendations

  • Reposition business subjects within the K-12 curriculum to the level of importance they represent to student's future financial welfare
  • There seems to be a trend to start the educational process related to business and personal finance at an earlier point in the K-12 Curriculum
  • Earlier involvement with both business and personal finance will help to mold more responsible adult consumers
  • External organizations dedicated to the education of future business leaders, such as Junior Achievement should be approached for assistance in the classroom
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Conclusions

  • The majority of 6th and 9th graders receive most of their money from their parents or family members, the majority of 12th graders work for most of their money
  • 6th graders are more likely to save a larger amount of their money than 12th graders
  • Eighty percent of 12th graders save their money in a bank
  • 12th graders were most likely to have a checking account, however, the responses in this study indicated 6th graders were more likely to have a checking account than 9th graders
  • Approximately 20 percent of 12th graders carry a credit card, among those that have a card, 80 percent use it and 60 percent indicated they pay the balance on the credit card each month
  • Students self-reported a perception of having a high level of understanding with reading, writing, and math; while having the least amount of understanding with business finance and personal finance
  • Students perceptions of their abilities in the areas of business and personal finance are significantly higher than their actual scores in these areas
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Limitations

The questions used to determine student's understanding of business and personal finance were developed as a result of responses and discussions during preliminary focus groups held with each of the subject age groups in three districts. The questions students were asked to answer in this study are in no way intended to give a scientifically reliable gauge of the students' total knowledge regarding personal or business finance. Our goal was only to grasp a basic understanding of the capabilities amongst 6th, 9th, and 12th grade students and compare each of the 54 school districts invited to participate in the study. From these results, it is possible to determine the respondents' basic understanding of finance within these districts. It is not possible to determine the reasons for the variance in the scores from this study.

The scores given in this report should only be used to compare schools and should not be used as a comparison tool from other financial literacy studies. Its intent was not for use as a benchmark against other financial studies.

Furthermore, all data represented in this report have been obtained trough self- reporting, and although there seems to be no reason and/or rationale for inaccurate responses, it appears that some responses were from students who didn't take the survey seriously and their answers did not reflect the knowledge of the student.

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Methodology

This portion of the study was the final phase of a multi-phased research project to determine the knowledge of K-12 students pertaining to business and personal finance.

Reports for previous phases of this study have already been submitted to the client for their review. These phases have included the following:

  • Secondary sources utilized by SMAC to develop a mail survey to be completed by participating school district superintendents. The purpose of the mail survey was to determine levels of financial instruction in each of the participating school districts.
  • Superintendents of the participating school districts were asked to complete the mail survey. A report summarizing the results of this survey has been submitted to the client. These results indicated a general lack of financial instruction in these districts for all grade levels.
  • A moderator's guide was drafted by SMAC to lead focus group discussions held in three area school districts with multiple grade levels. The goal of these focus groups was to determine roughly the scope of 6th, 9th, and 12th grade students' understandings of business and personal finance principles.
  • A questionnaire was then developed by SMAC; it was tested, and refined until its format was determined to be valid for use with students in 6th, 9th, and 12th grades. The 54 school districts previously contacted by SMAC were invited to participate in this portion of the study by asking their students in these grades to complete the questionnaire. Questionnaires along with instructions for administers were sent to each school district volunteering to participate. Following students completion, the questionnaires were returned to SMAC for coding and analysis.
  • Returned questionnaires were coded and entered into SMAC's statistical software SPSS (statistical package for the social sciences) for further analysis. This report and accompanying PowerPoint presentation summarizes the results of this analysis.

 

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Participation

In total, 54 school districts were invited to participate in this study. Superintendents of each district were contacted via mail and email and asked to respond to SMAC with the number of questionnaires needed for each grade. Thirty-Four districts responded to the request and indicated the number of questionnaires needed. Of these 34, 32 school districts returned a grand total of 3,725 questionnaires to SMAC, all of which are represented in this data.

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Student Demographics

Grades

Thirty-four percent of students were sixth graders, 34 percent were ninth graders, and 29 percent were 12th graders (Chart 1). The majority of remaining students (3 percent) was 11th graders. Schools that did not have 6th graders available chose to administer the questionnaire to 11th graders instead and we have included these students in our cumulative results.

Ages

The age of students ranged from 10 to 19 years old. Twenty-three percent were 11 years old, 22 percent were 14 years old, and 19 percent were 17 years old (Chart 2).

Gender

Fifty percent of students were male and 50 percent of students were female (Chart 3).

Parent/Guardian Employment

Students were asked the open-ended question,

"What does one of your parents (or guardians) with whom you live, do for a living (or where does he or she work)? "

This question was asked twice to allow students to indicate both (if needed) of their guardian's or parent's professions. This question may seem a bit vague, but due to the fact that this survey was given to 6th, 9th, and 12th graders, it was worded in such a manner that 6th graders showed good comprehension during questionnaire testing.

The responses to the open-ended questions were recorded by SMAC, then grouped into the following 11 categories and entered into SPSS: Service Industry, Home, Education, Agriculture, Unemployed, Retail, Medical, Professional, Manufacturing, Other, and Government.

Overall, students identified the groups, "Service Industry, Agriculture, and Manufacturing" the most frequently (Chart 4). The category, "other" had a disproportionately high number due to the inability to classify some of the students' responses.

Living Arrangements

Seventy-nine percent of students live with both of their parents and 14 percent of students live only with their mother (Chart 5).

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Student Curriculum Demographics

Business Classes

Over 80 percent of 6th graders have never taken a business class. Over 70 percent of 12th graders have taken at least one business class. Approximately 75 percent of 9th graders have never had a business class (Chart 6).

Looking at the data, a majority of 9th graders indicated they were currently in a business class. Most 12th graders had a business class in 11th grade and most 6th graders had a business class in the 4th grade (Chart 7). This seems to indicate that some effort is being made to infuse business curriculum into earlier grades than had previously been the case.

Junior Achievement Classes

Over 80 percent of 12th graders indicated they have never taken a Junior Achievement class and over 75 percent of 6th graders have never taken a Junior Achievement class. Most 6th graders had a Junior Achievement class in 5th grade (Chart 8). It appears that Junior Achievement is beginning to have more of a presence in the activities of younger students than was previously the case.

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Detail of Findings

Financial Demographics

Q: Where do you get most of your money? (Check one)
Answers Overall:
35% - Parents or Family
46% - Job/Work
5% - Holidays
10% - Birthdays
5% - Other

Over 75 percent of 12th graders get most of their money from working at a job, with 20 percent indicating they get their money from their parents. Approximately 50 percent of 9th graders responded that they get most of their money from their parents, and less than 40 percent said they get most of their money from work. Twenty percent of 6th graders get most of their money from birthdays, and 30 percent of 6th graders work for most of their money (Chart 9).

Q: On what do you spend most of your money? (Check one)
Answers Overall:
10% - Car
22% - Clothes
8% - Food
13% - Games, Toys, etc.
9% - Sports Equipment
24% - I save it (don't spend it)
13% - Other

The most popular response for 12th graders was "Car", for 9th graders "Clothes", and 6th graders "I save it (don't spend it)" (Chart 10).

Q: How much of your money do you save? (Check one)
Answers Overall:
7% - None
24% - Less than half
30% - About half of it
34% - More than half
6% - All

Nearly 40 percent of 6th graders save "More than half of their money". About 30 percent of 9th graders save "half of their money" and 30 percent of 12th graders save "More than half of their money" (Chart 11).

Q: Where do you save your money? (Check all that apply)
Answers Overall:
38% - I keep it in a safe place at home
10% - My parents keep it in a safe place for me
65% - In a savings account at a bank
9% - Other

It is encouraging to observe the majority of students in all grade levels save their money in the bank. Amongst 12th graders, 80 percent save their money in the bank (Chart 12). In 2007, Junior Achievement conducted a nationwide poll concerning personal finances (the 2007 JA Interprise Poll). According to this poll, 72.7 percent of teens responded having a savings account.

Q: Do you have a checking account? (Check one)
Overall Answer:
37% - Yes

The majority of 12th graders do have a checking account. Approximately 20 percent of 9th and 6th graders have accounts (Chart 13). According to the same JA Poll, 27.2 percent of teens reported have a checking/debit card.

Q: Whose money is put into your checking account? (Check all that apply)
Overall Answers of those who have a checking account:
21% - Parents
88% - Yours
5% - Other

The majority of those students who have a checking account put their own money into it. Approximately 40 percent of 6th graders indicated that their parents' money is put into their accounts (Chart 14).

Q: Do you carry a credit card? (Check one)
Overall Answer:
8% - Yes

The results of this question illustrate the need for K-12 institutions to train students on the ins and outs of buying-on-credit (Chart 15). The results on this question coincide with other national studies completed by both Junior Achievement and other financial literacy advocates. According to the 2007 JA Interprise Poll, 8.5 percent of teens have credit cards.

SMAC hypothesized that even though students under the age of 18 may not be able to secure a credit card in their name, they may still be able to make purchases with a credit card. In order to further investigate this situation, SMAC contacted the VISA credit card company to get a better understanding of the guidelines regarding the issuance of credit cards to students. According to VISA, each state sets a minimum age limit for someone to have a credit card. In Minnesota, this age limit is 18 with no one under that age being able to get a credit account of their own; however, a VISA representative informed us that an adult could list someone under the age of 18 as an authorized user of their account. That person would receive a card of his/her own with his/her own name imprinted on it, but all liability for the card would remain with the listing adult.

Q: Do you use [the credit card] to buy things? (Check one)
Overall Answer of those who carry a credit card:
79% - Yes

Nearly 80 percent of those who carry credit cards use them, regardless of grade level (Chart 16).

Q: Whose money is used to pay your credit card bills? (Check all that apply)
Overall Answers of those who carry a credit card:
40% - Parents
67% - Yours
4% - Other

Those students in 6th grade seem to pay for about half of their credit card bills, 9th and 12th graders tend to pay for a majority of their credit card bills, but still receive help from their parents (Chart 17).

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Spending

Q: Write the amount you would spend on the following things?

Approximately 30 percent of 9th and 12th graders' money would be spent on college, 20 percent would be spent on a car (Chart 18).

Sixth graders spread the allocated amount of money rather evenly, with savings receiving the most with almost 20 percent (Chart 19).

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Performance Perceptions

Subject areas

We asked students to indicate how well they understand or can work with a number of school subjects. This question was asked to determine if students would be able to predict their own levels of comprehension in these areas. Interestingly, students at all levels felt they knew the least about both business and personal finance amongst all other subjects (Chart 20). This result is supported by the student scores given later in this report.

Personal Finance

On average, students indicated they felt they somewhat knew what income, expenses, and budgeting was/were. The area with the lowest perceived knowledge was net worth (Chart 21).

Business Finance

On average, students' responses indicate they perceive themselves as having less knowledge of business finance than personal finance. The average student seemed to have a favorable perception of his/her knowledge of profit and liabilities. Results were split on assets and revenue (Chart 22).

Confidence

The majority of students were at least confident in their answers with 20 percent responding they felt very confident in their answers (Chart 23). The results did not support this level of confidence.

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Personal and Business Finance Question Scoring

Scores for each school were compiled using the following guidelines:

  • (Check one) questions were awarded one point for each correct answer; this number was divided by the total number of responses for that question.
  • (Check all that apply) questions were awarded one point for each correctly identified option, and one point for each incorrect option left blank. If the student incorrectly checked a selection that should have been left blank or left one that should have been checked, blank, they simply did not get credit for that selection. These numbers were then divided by the total number of responses for that question, and then divided by the highest score possible for that question. "I don't know" answers were not included in either of these calculations.
  • Scores were compiled only for questions specifically asking for personal or business finance knowledge.

 

This scoring method was uniformly used for all schools for comparison purposes.

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Personal Finance Questions

Q: What does it mean to "budget" your money? (Check one)
Answers Overall:
1% - The amount of money you loan to friends
65% - The process of planning where and how much money you will spend before you get it
14% - All the money you make minus the expenses you had in making that money
4% - The amount of money you receive from all sources
17% - I don't know

Eighty percent of 12th graders correctly answered this question. Over 60 percent of 9th graders, and over 40 percent of 6th graders answered correctly. Unfortunately 30 percent of 6th graders answered "I don't know" (Chart 24).

Overall, students had agreed to an earlier statement "I know how to make a budget," and students responses support this result. By school, the majority had an average score over 60 percent (Chart 25).

Q: What is your "income?" (Check one)
Answers Overall:
7% - The amount of money you have in the bank
6% - The amount of money your employer owes you but has not yet paid you
24% - All the money you make minus the expenses you had in making that money
45% - The amount of money you receive from all sources
18% - I don't know

Over half of all 9th and 12th graders correctly identified the answer; however, the majority of 6th graders selected the "I don't know" option (Chart 26). When students had been asked previously to agree or disagree to the statement "I know what income is," the average student slightly agreed with the statement. This illustrates that the students' perceptions of knowledge in this area are inflated. By school, the average scores for this question were below the 60 percent for the majority of the schools (Chart 27).

Q: What is your personal "net worth?" (Check one)
Answers Overall:
18% - The amount of assets you have minus your liabilities
4% - The money that you receive from an employer or your parents as an allowance
11% - All the money you make minus the expenses you had in making that money
11% - The amount of money you expect to make in the coming year
56% - I don't know

Answers for this question were widespread with the majority of 9th and 6th graders selecting the "I don't know" option (Chart 28). Students perceived themselves as having the least knowledge in this area according to the earlier question regarding net worth. Nearly every school's average on this question was below the 60th percentile (Chart 29).

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Business Finance Questions

Q: What is "revenue?" (Check one)
Answers Overall:
4% - The retail price charged to a customer for a product
24% - The money that comes into a business from the sale of products or services
7% - All the money a business makes minus expenses
8% - The amount of money a business pays to the government each year
56% - I don't know

Approximately half of 12th grade students were able to identify the correct answer. Again, the majority of 9th and 6th graders selected the "I don't know" option (Chart 30). The average student neither agreed nor disagreed to the statement "I know what revenue is," therefore results to this question are not surprising; however, they are definitely not encouraging. No school had an average score above 60 percent for this question (Chart 31).

Q: How would you define "profit?" (Check one)
Answers Overall:
7% - The amount of cash a business has on hand
31% - The money that comes into a business from the sale of products or services
45% - All the money a business makes minus expenses
4% - The amount of money a business pays to the government each year
14% - I don't know

The majority of 12th and 9th grade students selected the correct answer; however, nearly 80 percent of 6th graders were unable to identify the correct answer (Chart 32). The average student indicated they knew what profit was, but less than half of the students responded correctly. The vast majority of schools had average scores below 60 percent on this question (Chart 33).

Q: Which of the following do you think are considered "assets?"
(Check all that apply)
Answers Overall:
37% - Supplies
35% - Materials
17% - Payroll (money you pay employees)
15% - Rent
35% - Product on hand (inventory)
35% - Cash
38% - Land
39% - I don't know

The majority of 6th graders chose the "I don't know" option for this question. The 12th graders had a majority of students correctly identify the given assets (Chart 34). The average student neither agreed nor disagreed to the statement "I know what assets are." Only one school had an average score above 60 percent for this question (Chart 35).

Q: Which of the following do you think are considered "expenses?"
(Check all that apply)
Answers Overall:
49% - Supplies
48% - Materials

47% - Payroll (money you pay employees)
63% - Rent
18% - Product on hand (inventory)
13% - Cash
34% - Land
19% - I don't know

The majority of students correctly identified rent as an expense, but a majority also incorrectly identified supplies and materials as expenses (Chart 36).

The average school score for this question was higher than other questions, this is in part due to the scoring system used for this question. Since this question has only 2 correct options, students could have achieved higher scores by leaving a majority of the options unchecked (Chart 37).

Q: In business, which of the following statements are generally accepted as realistic?
(Check all that apply)
Answers Overall:
38% - High risk = High reward
15% - High risk = Low reward
17% - Low risk = High reward
27% - Low risk = Low reward
42% - I don't know

In all grade levels, students were able to identify "high risk = high reward," but all of these grades failed to identify "low risk = low reward" as often. The majority of 6th graders selected the "I don't know" option for this question (Chart 38).

The majority of schools' average scores were below 60 percent again for this question (Chart 39).

Q: Where does the government get their money?
(Check all that apply)
Answers Overall:
88% - Taxes
21% - Sale of Services
27% - Donations
11% - American Flag Sales
38% - Government Bonds
13% - Military (National Guard, etc.)
6% - They print what they need
13% - I don't know

The vast majority of students correctly identified taxes as one of the government's sources of money. Other options received relatively similar amounts of responses (Chart 40).

All schools were above the 60 percent mark for this question (Chart 41).

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Overall Scores

The overall achievement level on this exercise indicates that a fundamental understanding of basic business terms and operating parameters is less than adequate for the participants to gain a competitive foothold in the business field. The highest score achieved by a school district (averaging the three grades) was 65.73 percent. The district with the most limited scoring achieved 46.77 percent (Chart 42). This 19 percent spread from the highest to the lowest participating district would seem to indicate an overall lack of understanding basic business fundamentals. Questions relating to personal finance issues were averaged in with the above statistics.

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