First Kendall Dunn

Kendall Dunn

Dr. Marquard

English 1060-13

4/25/13

Financial Literacy

Introduction

When one is asked what is financial literacy most don’t know what that means (et.ad Mandell, Klein).  It is sort of self-explanatory.  Finances consist of our money, but not just dollar money but saving accounts, loans, debt, inflation etc.  Literacy consists of the lack of knowing or actually having knowledge about a subject.  A definition given by Bryce Jorgensen about financial literacy is the ability to read, Analyze, manage, and communicate about the personal financial conditions that affect material well-being.  Finical literacy includes the ability to discern financial choices, discuss money and financial issues without discomfort, plan for the future, and respond to life events that affect every day financial decisions (Jorgensen 467).  Some might argue that financial literacy isn’t that important.  The rebuttal to the argument is that everyone has to deal with their finances everyday of their life, unless one is like Bill Gates which doesn’t have to worry about money then.  Therefore we might as well be educated and educate people when it comes to their finances.  Now the question becomes what can we do to educate people about the finances?  What procedures can be implemented to control this?  This essay argues that the parents influence a child’s financial literacy, what should be done in high school and college about this issue, how it differs with genders, and the problem that come upon elders about financial literacy (et al Jorgensen, Hite, Cude, Mandell, Garrison, Lusardi).

Financial Socialization: Parents

Financial education starts at young ages when children examine how their parents spend their money.  If the parents are careless with their then there’s a good chance that the children with grow up to do the same.  On the other hand, if the parents are responsible with their money than theirs a good chance that the children will be the same way.  In a study done by M. D Clarke, it concluded that parents were perceived to influence young adults’ financial attitudes influence construct that consisted of two main thoughts: the amount of financial learning that took place, and the frequency of financial learning (Jorgensen 474).  This evidence backs of the viewpoint that parents effect what children know and do not know about finances.  

Children and teenagers look up to all that their parents do so it is important that the parents are cautious of their spending.  This is called parental influence using financial socialization (Jorgensen).  Socialization is the process through which people learn how to act and interact within their society, so financial socialization is the process of acquiring the developing values, norms, and knowledge that goes along with financial viability and well-being of a person (Jorgensen 467).  For instance, someone who is racist may be because their parents were that way and the children saw how their parents acted towards opposite races.  The child wasn’t born a racist but instead saw how their parents operated.  Some argue that parents don’t have anything to do with their child’s decision making when it comes to the money and finances.  A study done by M. E. Pritchard and B. K. Myers found that the financial values of teens and their parents have correlation with each other.  In another study, organized by M.W Allen et al, they found that young adults saw money as a problem when coming from a home where the parents argued a lot about money and finances (Jorgensen 468).  Parents have an enormous effect on their child’s financial issues.  It can be a positive effect and unfortunately can have a negative effect as well. 

Financial Illiteracy: High School 

High schools are not really doing much to help students that are financial illiterate (Hite).  In 2007, only seven states required high school students to take a finance course before graduation.  Later in 2009 it increased to 13 states, but why not all 50 (Hite et al. 253)?  School administration should look at the stats and see that just as little as 10 hours of financial instruction makes a significant difference in one’s spending habits (Hite et al. 254).  Once someone has been taught some ideas and topics about their finances it can only benefit them down the road in life.  Parents can teach their children the concepts that they learned because the good ideas about finances is that the way to handle them has never changed.  It will help them when they start thinking about retirement.  With being taught how to manage finances, students will be more apt to set aside money for the future, and try to repay debts sooner.  After going through the course the students will fell that they know more about the cost of buying things.  People who argue that an economics course or a finances class will not benefit the students in the future need to ask themselves a few questions (L. Vitt).  A few students will find it pointless and not want anything to do with it, but what about the students that are heading to college and have no idea how to manage student loans?  Sooner or later they will be in debt and won’t have the money to pay them off.  The students won’t be experts, but at least they will have an idea.  To argue that it doesn’t matter if the students have that course or not doesn’t really make much sense (Hite et al).  In a study done in 2009, research shows that high school courses in economics and business reduced the probability an adult was unbanked and also so that the curriculum increased financial knowledge (Cude 273).

What is a way to answer some of the rebuttals that experts like Vitt and Mark Lomanno will come back with that disagree with this idea?  The argument that results have shown a positive correlation between students’ financial literacy scores and their index scores indicating that financial knowledge is related to self-benefitual financial practices (Hite et al. 255).  A student will have a hard time learning about financial issues if they aren’t taught to them. One can learn from going through it, but those going through it may take years upon years to figure out.  Just like math and English class are required to graduate high school, so should a finances class.  Luckily more states are making this a requirement, and the more states that do so the more knowledge high school students will have about finances once the go into the “real world” (Hite et al. 256).

Financial Illiteracy: College

Once these high school graduate students enter into college they are hit by loans and grants for college and to help them get through college.  They will get credit cards and just spend and spend and spend and think that everything is going to be okay when inopportunely they are just drowning themselves in to debt.  Over half of all freshmen borrow to pay for their education and this decision will affect them in ways that at the time they will not be able to understand (Goetz et al. 27).  In a report done by Nellie May, in 2005, 56% of undergraduate college students have four or more credit cards in their final year and that these students have an average balance of close to $3,000.  The worst part of that is only 21% of them pay their balances in full each month (Mandell, Klein 17).  This goes back to the argument about high school students not knowing what to do when it comes to financial decisions.  The students get away from home and are making their own decisions.  It’s a part of growing up and it’s a big step in life, but it can also be an eye opening time as well.  If the college student is a spender then it will show in the bills that he or she will have and can affect them more than just financially. 

Financial related stress, which sadly has become more common among college students, can lead to poor academic performance and can even lead to the student dropping out of college.  It’s sad that something like this would force a student to drop about because it is something that could be prevented if one is educated about their finances (Goetz et al. 27).  Why not make an economics class a requirement in college as well?  Researches have concluded that for low financial literacy among college students is to require a course or incorporate personal finance topics into courses that the student must take, like a general education course (Goetz et al. 30).  Just like the math’s and the English’s, one should have to make a certain grade high enough that shows that they have a grasp of the economic and financial concept.  Whether that is an A, B, or a C, something should be done for the course.  To argue that this should be done the first semester for freshman is intelligent. 

Now back to the research question of what can we do to educate people about financial literacy and in this case we are talking about college students?  Research has shown that college students would prefer to receive financial information in person by a person with financial professional background (Goetz et al. 30).  Anything to help the students learn how to spend their money and how to manage it ,and luckily there are even more options other than just face to face teaching for example campus workshop or by Internet.  

Financial Illiteracy: Gender Differences

Some would argue that there isn’t a difference between genders when it comes to finances and financial literacy (Vitt).  The argument that can rebut that is that women tend to take less financial risks than men when it comes to investing (Garrison et al.).  If one thinks about it makes sense.  Women tend to live longer than men do thus they need to save more because they are more than likely going to spend some of their life as a widow.  Women are more apt to save their money than men are, and women tend to have more money than men even though women make less money than men doing the same job (Garrison et al. 60).  Men think in this manner most of the time, higher risk higher reward when women tend to think the opposite.  There is a chance of having a higher reward when one gives a lot, but there is a better chance of them losing what they have given up instead of receiving a bigger reward.  A hypothesis that has been made is male college students will have greater willingness to take financial risks than female college students (Garrison et al. 63).  This means that something has to be done for the young men to assist them in their finances.

What can we do to assist young men in college when it comes to financial risk?    The argument can go back to the point about the parents influence in the man’s life (Jorgensen).  If the son’s father was a big gambler or if he always saw his father buying lottery tickets can have an effect on the son on taking risks.  The “go big or go home” effect could kick in and they won’t stop until they win it all.  Also in a study discussing the topic of whether female college students were given more financial education by their parents then male colleges students shows that female students have had a good deal of more conversations with their parents about saving and investing (Garrison et al. 70).  Again, the parents influence is very important for the child because it will only benefit them if they are taught properly.  But it is not all on the parents in this case.  Young men need to ask their parents more questions about financial topics.  Most guys thing that they don’t need help with anything and that they can make their own decisions the right way.  The more questions presented the more a young man can learn and will benefit him later in life. 

Financial Illiteracy: Elders

Financial illiteracy isn’t just an issue in young adults but also with elders as well.  In a study done in 2007, it shows that early baby boomers who display high levels of financial illiteracy were more likely to plan for their retirement which would lead to them being more wealth than baby boomers that have lower levels of financial illiteracy (Lusardi 28).  One would think that young adults would have the most problems with credit cards and debt, but surprisingly that’s not the case.  The problem is that these elders have fees and interest charges that have been building up higher and higher to where they can pay them or they have to borrow the money.  For example, in a study over the ages of elders 65-plus shows that credit card fees are the most cited reasons for bankruptcy filings with two-thirds of elderly debtors giving these reason (Lusardi 30).

  The argument that can be brought up with these findings is why elders are given the opportunities to receive more and more credit cards (Lusardi 29).  Of course these people are not that educated in the topic of financial literacy and one just can’t teach at 60 years old about their finances like a high school student or a college student.  There should be a limit on how many credit cards and person over the age of 55 should have.  The government is just taking money from older people who are retired or just can’t work anymore.  One could argue that an elder just needs one credit card and should be examined carefully on how they spend it.  The rebuttal someone could have for this is that the banks and government would have control over elders and how they spend their money which is an appropriate argument.  The rebuttal to that argument is that the debts of some elders is just too much that one needs to regulate how they spend their money for their own good.  For example, in 2007, between the ages of 65-74 years, 47 percent had mortgage debts on their house, 37 percent ha d credit card debt, and 26 percent had installment loans; which all added up to 65.5 percent of 65-74 years had some form of debts (Lusardi 29).  Something has to be done about that. 

So what has to be done to help the elderly with their financial literacy?  Some would say that these elders are to older to teach them anything new because of their age.  A study done in 2007 found that retirement seminars had a positive wealth effect and this effect helped the elders with little to no education of finances (Mandell, and Klein 17).  If not seminars then limit things such as credit card amounts.  There is no reason that an elder should have three or four credit cards because that just leads to more debt and more problems for them.    

Conclusion

Financial illiteracy is not just an issue with young people but also elderly people as well.  To argue that enough is already being done for financial illiteracy is somewhat bizarre.  There is not enough education that can be given to people about their finances.  There is no doubt that it will affect everyone, but there is a big chance that it will be a benefit to a great deal of people.  The argument that schools need to do more to equip their high school graduates with knowledge about finances is appropriate.  The argument that universities and colleges need to not only provide a chance to receive a degree but also train the students how to manage their finances is also valid.  The elderly are not passing the age of being taught how to handle their money also.  They need just as much if not more help learning about their finances so that they are not retired and having to still pay debts.  Financial literacy is a big deal no matter what ones age is.  People with the knowledge of this subject should be doing anything and everything to help people who lack financial education.  Granted, no one has the answers to everything when it comes to finances, but helping with just the easier and smaller issues will make a difference when it comes to the bigger and more difficult issues.   The government and society should pay more attention to this on-going problem of financial illiteracy and figure out some ways to help prevent it before it spirals out of control. 

Financial Literacy

A Research Proposal

Kendall Dunn

Dr. Marquard

English 1060-13

4/25/13

Introduction   

Financial illiteracy is a subject that is sometimes over looked in life.  People are becoming bankrupt and such a young age and don’t know how it happened.  It starts when kids are in school but not much is being done. In 2007, only seven states required high school students to take a finance course before graduation.  Later in 2009 it increased to 13 states, but why not all 50 (Hite et al. 253)?  School administration should look at the stats and see that just as little as 10 hours of financial instruction makes a significant difference in one’s spending habits (Hite et al. 254).  No one has taught the subject of finances.  What can be done to prevent the lack of financial skills?  This is the questions we need to ask and see what must be done before more and more people are becoming bankrupt.

Thesis/Claim   

This essay takes the position of what must be done to prevent financial illiteracy.  It argues that the parents influence a child’s financial literacy, what should be done in high school and college about this issue, how it differs with genders, and the problem that come upon elders about financial literacy (et al Jorgensen, Hite, Cude, Mandell, Garrison, Lusardi).  This is the claim of the essay.

Research Methodology          

There were many researches and authors who have gone deeper into studying the topic of financial literacy.  For example, Bryce Jorgensen talks about the influence parents have on finances.  Nancy Hite and Donald Miller discuss what isn’t being done in the high school to prevent financial illiteracy and Joseph Goetz and Brenda Cude give some ideas that would benefit the students.  Selena Garrison and Michael Gutter speak about the gender difference when it comes to financial literacy and how women are most of the time more educated about the subject.  Lastly, Annamaria Lusardi talks about the problems that elders have with their finances that will surprise many people.

Significant of the Argument  

This argument is important because not enough is being done to asset middle age kids all the way to elders about finances.  It is also significant because this is a topic that everyone has to go through.  Everyone is going to have money to their name at one point in life.  What they will do with it is the question.  If they are taught the simple ideas about things like debt and credit cards, student loans, retirement etc., there would be one less thing that people would have to worry about.  Granted, no one has all of the answers but the knowledge these professors and scholars know should communicate them to as many people as they can.

Kendall Dunn

Dr. Marquard

English 1060-13

4/27/13

Final Reflection on Service Learning

As a golfer on the golf team, we are required to do five hours of community service and when I found out that I could go to the Primary school that our coaches daughter goes to that’s where I went.  I love kids and doing actives with them.  The golf team got a chance to read to kids from different grades and help them write and type.  The best was when one of the classes was learning about money.  That was right up my lane since I was doing my paper on financial literacy.  It shocked me how advanced some of the students were already.  In the kindergarten class I was in, they were using computers.  When I was that young I didn’t really know what a computer was or even how to use it.  In this reflection I will diagram every hour that I did and give some stories when I was with the kids.

The first time I went to Wagram Primary School, I and one of the girls on the team got the chance to be with the kindergartners.  In this time we read all of their favorite books and even read some books that I read in my childhood.  But what got to me was that some of these books were like at a 3^rd or 4^th grade level of reading.  At first I didn’t think that they would be able to understand the books but they all did.  Then one of the kids read a book.  This book, I thought, was the hardest to read and especially for such a young child, but he read through it with ease.  He never had to ask us what word that was and pronounced them all correctly.  This taught me that things had changed since I was in k-5 and the kids are getting started early how to read.  Yet, there were still some kids that were slow to the learning.

The student I remember the most for this k-5 trip was a little boy named Tom.  He struggled with the simple things about reading the books.  He was far from illiterate, but he was nowhere near the reading level of some of his classmates.  I worked with him with pronouncing words like “cat” and “hat”.  I had to give him examples of these things so he could better understand them.  I used some tactics that I observed and learned from my paper on financial literacy.  For someone to understand something you have to go into great detail and give examples for it to click.  When someone is having trouble with their finances, someone had to break it down for them to understand it.  For example, that day I was wearing a hat and he was having a hard time with that word.  I kept pointing to my head every time that word came up in to book.  He started to grasp the concept of the word hat.  The best part was at the end of the class he got a chance to read the book me and he worked on.  When the word hat come up he pointed to his head.  That little idea that I created help him get through that book easier than at first.

On another occasion, I was with the 6^th graders at Wagram Primary School.  These were the students that thought they knew everything.  The same thinking I had when I was that age.  Here I saw the differences in how students talk when coming for different social classes like we learn in one of our reading this semester.  I observed two specific students in the class.  The first was a student named Alec that I could tell came from a higher social class and the other was a student named Damien that appeared to look and talks like someone from a lower social class.  I could have been wrong about the both of their social classes, but that is just what I observed.  The way the both of them communicated and handled themselves was interesting.  Alec used more proper words.  They teacher was showing pictures of Hispanics and Latino people.  He knew and understood words like Hispanic and Latino when most of the other class didn’t.  Damien called the “just a brunch of Mexicans”.  That sounded somewhat offensive then I thought more about his statement.  He didn’t know what they were specially called.  He just associated people with that skin color as a Mexican.  That was just the way he has always observed them.  Maybe his parents observed Hispanics and Latinos in this way too and that’s what he got it from.  What really showed their possible social class differences was when we brought of the idea of what the students would do if they had one million dollars.  Damien said that he would buy all of these expensive cars, get a huge mansion, get all of the new Jordan basketball shoes, and buy a basketball court.  That’s the answer I excepted someone from a lower social class to say, which there is nothing wrong with.  Alec said that he would do as his parents would and save and invest his money.  Again, the answer I except to be said.  He said that we would invest in Google and he said some coffee place my parents go to all the time (Starbucks).  This concept goes back to my final essay.  Young kids will, most of the time, do as their parents do when it comes to money.

I didn’t really have many lows when doing this service learning project.  The only low was that it didn’t last longer because I loved doing this.  The highs were observing how intelligent these young students are now compared to how it was when I was their again.  I wasn’t taught Spanish until I was in 9^th grade and the 5^th graders at Wagram were learning Spanish.  It was a great experience with the students and I hope that I get to do something like this again.       

We are coming down to the end of our classes together. I’ve been gone playing golf for the university a lot the past few weeks which prohibits me from coming to class but I am all caught up. The essay when really well and am looking forward to revising my paper. I hope its around the grade that I am looking for.

English class has been going really good. I have been working hard on my final essay paper and its been very time consuming. But I feel as if I am become a research and have a good knowledge about financial literacy. The paper surprisingly wasn’t that hard to type. I just hope I make a good grade on it.

I have been working hard on our annotated bibliography here lately. Its starting to get difficult to be honest. Have to work on it every single day. But I have a feeling that the essay will be easier since I have all of my stuff down. Unfortunately I have missed some class time because of golf but I am doing my best to keep up.

English class has been kind of low the part few weeks. We’ve been working on our annotated bibliography which is going good. I’m having to work hard to find the rest of my sources but its not to bad. I think I’m going to break down my financial literacy between men and women. I learned some about that in one of my sources. One of my sources actually came to the solution that having financial class doesn’t benefit someone more than some else who didn’t have the class. That was really shocking not going to lie. But so far its going well.