Personal Finance Classes Help More In College Than High School

COLUMBUS, Ohio – Adults who took a high school personal finance class don't do any better on a test of investment knowledge than those who didn't take such a class, a new study found.

And while college classes on personal finance do seem to help improve adults' knowledge of investment topics, neither high school or college classes spurred students to save more of their money, researchers found.

Those who saved more than average tended to have personal financial experiences, such as owning stock, as well as a higher income.

Those who took only a college class scored more than a full point (or letter grade in academic terms) better than those who took only a high school personal finance course. Those who took only a high school course did not do better than respondents who did not take any class on personal finances.

“We need to find ways to make high school finance classes more relevant and helpful to students,” said Jonathan Fox, co-author of the study and associate professor of consumer sciences at Ohio State University.

“Although college classes do have more of a positive impact, not everyone goes to college or takes college-level personal finance classes. That's one reason why we need better ways to promote financial literacy and positive financial practices like saving and planning for retirement.”

Fox conducted the study with Tzu-Chin Martina Peng, a doctoral student in consumer sciences, Suzanne Bartholomae, an adjunct assistant professor in human development and family science, and Garrett Cravener, a law student, all at Ohio State . Their results were published in a recent issue of the Journal of Family and Economic Issues.

The study involved 1,039 alumni of Ohio State who took part in an online survey about past and current financial experiences, income, savings and other issues. The survey included a test of investment knowledge, which probed how much people knew about stocks, bonds, interest rates, investment risks, and related issues.

The results showed that about 20 percent of respondents had participated in a college-level personal finance course, and 17 percent took a high school course. Only a small number (47 people) had taken courses at both levels.

Respondents could score from zero to 10 on the investment test. Those who took only a college class scored more than a full point (or letter grade in academic terms) better than those who took only a high school personal finance course.

Those who took only a high school course did not do better than respondents who did not take any class on personal finances.

Somewhat surprisingly, those who took a college class also scored higher on investment knowledge than did those who took both a high school and a college class. However, so few people took classes at both levels that it is difficult to make much of that finding, Fox said.

Why would college classes be more effective than those in high school?

Fox said one reason may be that college classes are longer and more comprehensive and likely to include more information on investment topics.

In addition, the lessons of a personal finance class hit closer to home for college students who manage money every day.

“College students may be paying rent, tuition, cell phone bills, and dealing with financial aid issues,” Fox said. “They can see the importance of financial literacy.”

The best way to improve high school personal finance classes may be to interject some real-world financial issues into the curriculum, according to Fox.

“Ideally, the students could use their own family's finances and budget as a way to get into the subject in a realistic way,” he said.

That doesn't have to pose privacy issues, he said. Students could add or subtract zeros from their family's income, or the class could discuss issues just in percentage terms, such as how much of each family's income is devoted to housing.

The study showed the value of real-life financial experiences in improving knowledge. For example, study respondents who held a bank account before age 18 had scores more than 5 percent higher than those who didn't.

Those with higher income, and those working in business also had higher levels of knowledge about investment issues. Men also tended to score higher than women.

While people who took personal finance classes didn't save more than others, respondents with real-life life financial experiences did tend to save more. Respondents who held stock before the age of 16 had a savings rate about 1.5 percent higher than others, while those who currently held stocks saw a 3.5 percent increase in household savings rates. As expected, higher income was also linked to higher savings.

Fox said the results of the study suggest more emphasis should be given to financial education beyond high school.

“Right now, most financial education classes are aimed at high school students. While we should improve those courses, we also need to be aware of the benefits of teaching personal finance in college and other settings, such as the workplace, where we can reach engaged adult learners,” Fox said.

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Contact: Jonathan Fox, (614) 292-4561; Fox.99@osu.edu

Written by Jeff Grabmeier, (614) 292-8457; Grabmeier.1@osu.edu