Financial Education Association

Personal Financial Literacy: Perceptions of Knowledge, Actual Knowledge and Behavior of

College Students
Author(s): Pamela M. LaBorde, Sandra Mottner and Pamela Whalley
Source: Journal of Financial Education, Vol. 39, No. 3/4 (FALL/WINTER 2013), pp. 1-30
Published by: Financial Education Association
Stable URL: http://www.jstor.org/stable/23608645
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 Personal Financial Literacy: Perceptions of
Knowledge, Actual Knowledge and
Behavior of College Students

Pamela M. LaBorde, Sandra Mottner and Pamela Whalley1

Western Washington University

There is substantial evidence that financial literacy is lacking at many

levels. This
paper focuses on the financial literacy of college
undergraduates. While not a new topic of investigation, this research
augments existing literature by comparing students' perception of
knowledge, actual knowledge and behavior regarding financial decisions.
The purpose of the study is to build an understanding that will aid in the
structure and content of curriculum for college students that will best meet
their needs during college as well as after graduation. Differences with
respect to variables such as gender, age, and major area of study (among
others) are also investigated. Findings reveal that perception of knowledge
was greater than actual knowledge, but differed by type of financial
knowledge. There are also significant differences between age groups and
college major, but most notably, a wide gap is found in the level of
knowledge by gender.

INTRODUCTION

Financial literacy has been studied and discussed in both the academic world
and the popular press. Indeed, the lack of financial literacy has been linked to the
subprime mortgage problems in the United States (Gerardi, Goette and Meier,
2010), retirement planning (Lusardi and Mitchell, 2007), lack of estate
inadequate
planning (Volpe, Chen and Liu, 2006), student debt and subsequent bankruptcy
(Mandell, 1999), and basic household financial mismanagement (Hilgert, Hogarth
and Beverly, 2003). Education is seen as the means to change the levels of low
financial literacy, although the effectiveness of the education has not been very
strong to date (Lyons, Palmer, Jayaratne and Scherpf, 2006).
While personal financial knowledge and personal financial education are
discussed in some K-12 programs (Bernheim, Garrett, and Maki, 2001; Mandell,
1999) and in some adult education venues, such as those found in the workplace
(Lusardi and Mitchell, 2007), the focus of this research is on the financial education
of undergraduate college students. Chen and Volpe (1998) found low levels of

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personal financial literacy at the college level with lower scores for younger college
students, females, non-Caucasian, no or little work experience, and lower parental
income. They also demonstrated that college students had more knowledge about
things with which they were currently familiar, such as auto insurance, as opposed
to topics they might have to grapple with in the future such as retirement decisions.
One of the goals of this paper is to update that study.
This study also augments previous research by examining a broader range of
financial topics. More importantly, it explores the linkages between knowledge,
perception of knowledge, and where feasible, behaviors. Of primary interest is
gaining a better understanding of whether differences between actual knowledge,
perceived knowledge and behaviors varies between different student groups. If, for
example, certain students perceive that they possess greater financial acumen than
they actually possess, this would indicate the need to better inform such students
about why taking a personal finance course has relevance for them. Further, there
are implications with respect to the types of pedagogical tools that may be
needed to convince students that they have more to learn, and that this knowledge
will be important to them both today and in the future. A literature review will
cover the concepts of financial literacy (or financial knowledge), perceived
knowledge, and actual behavior and their respective connections around six main
financial topic areas. Variables that have been examined in the literature that have
been shown to affect any of these areas will also be reviewed. The methodology and
results of a survey that was fielded to students at one mid-sized traditional public
university will be outlined and the implications for that university and others will
be offered.

LITERATURE REVIEW

Financial Literacy—Knowledge

Financial literacy, according to the U.S. Department of Treasury (2006) is, "the
ability to make informed judgments and to take effective actions regarding the
current and future use and management of money." Chen and Volpe (1998)
demonstrated that college students in several universities have low levels of
financial literacy across topic categories including general knowledge, savings and
borrowing, insurance, and investments. While study participants generally were not
very literate about personal finance they did demonstrate higher levels of literacy in
the areas of "general knowledge" and "insurance" (particularly auto insurance) with
which they probably have experience. The study found variables that demonstrated
significant differences between group means indicating possible causal relationships
between these variables and personal financial literacy. These variables include:
(1) business or non-business major, (2) class rank (freshman through graduate
student), (3) gender, (4) race, (5) nationality, (6) years of work experience, (7) age,

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and (8) income. There were statistically significant differences between groups
within almost all variables with respect to personal financial knowledge in each
category of financial literacy.

Perceptions of Financial Literacy

Do college students think they are financially literate? Do they have a

perception that they know enough to handle their current financial picture? Do they
think they will be able to handle their finances once they graduate from college and
are faced with making decisions about, for example, a 401(k) plan? If college
students perceive that their knowledge level is better than it actually is, will they
avoid opportunities to be better informed?
In a study focusing on the level of disconnect between perceived and actual
knowledge and the impact of this information on search behavior of state university
undergraduates, researchers found that the higher the perceived knowledge, the
lower the tendency to search for information (Radecki and Jaccard, 1995). The
perception of knowledge has been shown to change with age (Stipeck and Maclver,
1989), actual knowledge, and self-esteem (Radecki and Jaccard, 1995). Self-esteem
may work positively or negatively, causing individuals to perceive greater
knowledge than they actually have or perceive that they have less knowledge than
they actually do. The frame of reference of an individual, such as individuals or
groups of individuals who influence a person, also has an effect on the individual's
perception of their own knowledge. The frame of reference for a college student
includes family and peers. Finally, the relevance of the knowledge to the person
also has an effect on the level of perceived knowledge. If the knowledge has
immediate relevance to the student then it is likely to affect both actual and
perceived knowledge in a positive manner.
The implications of understanding the gaps between perceived knowledge of
personal financial issues and actual knowledge are important to financial educators,
students, and society in general. The findings of this paper could alter what and how
we teach. An understanding of the nature of these differences could lead to courses
that are better designed to meet student needs. For instance, the use of more
personally relevant examples could result in increased student retention of
information. Further, the marketing of personal finance courses could address
student perceptions of need rather than actual need. If actual need is indeed higher
than perceived need then students are less likely to understand why they should take
a personal finance course. Finally, if students and/or society can be brought to
realize that they do not understand personal finance as well as they think they do,
and that the need to know is critically important, then the decision to seek education
should become greater. The need to offer more opportunities for learning about
personal finance becomes even more urgent and could be driven by demand for the
knowledge.

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Actual Financial Decisions and Behaviors

Do students act on their perceived knowledge or on their actual knowledge?

Based on Radecki and Jaccard (1995) and Goldsmith and Goldsmith (1997), it is
expected that perceived knowledge holds a dominant position in the decision
making process and that actual knowledge holds a secondary, although important,
position. The implications of this, if true in the case of personal financial literacy,
are important for educators because education is seen as a key antidote to financial
illiteracy (Rosacker, Ragothaman, Gillispie, 2009; Lusardi and Mitchell, 2007;
Volpe, Chen and Liu, 2006; Hilgert, Hogarth and Beverly, 2003). Stuhldreher,
Stuhldreher, Forrest and Eicher (2007) argue that suboptimal personal financial
decisions and behaviors signal a need for better financial education. Further, they
find credit card use and debt among students are highly associated with unhealthy
and risky behaviors which indicate a greater need for help. However, irresponsible
credit card use is also linked to the level of parental involvement with the students'
financial actions (Palmer, Pinto and Párente, 2001). Consequently, unwise credit
card use by college students, for example, is likely to be related to a combination of
lack of education, poor parental guidance and/or training, perceived consumption
needs and even peer pressure. An absence of education alone may not be the sole
reason for poor financial decision making—socialization through parental
involvement or policies with respect to parental involvement may influence behavior
as well. It is also highly likely that peers influence personal financial decisions and
behaviors (Childers and Rao, 1992). Governmental influences will no doubt affect
some financial decisions and behaviors as requirements in the Credit Card
Accountability, Responsibility and Disclosure Act of 2009 encourage colleges to
offer debt management sessions to new students (Supiano, 2009).

Variables Related to Financial Literacy

As mentioned above, a number of variables have been related to personal

financial literacy. Because many of these have been shown to differentiate groups
with respect to knowledge, they are also likely to differentiate perceived knowledge
as well as behaviors. For example, gender differentiates both the level of perceived
and actual knowledge of financial investments (Goldsmith and Goldsmith, 1997).
As Chen and Volpe (1998) demonstrated, not only gender, but class rank,
ethnicity (race), age, years of work experience, and income made a difference in a
student's actual knowledge of personal finance. This study will re-examine these
variables with respect to actual knowledge, perceived knowledge, and behaviors
(where applicable). The variable "source of financial knowledge" has been added
because the literature surrounding perceived knowledge suggests that the frame of
reference, such as parents and/or peer groups, may have an effect on students' actual
or perceived personal financial literacy. For similar reasons, parental education and
income level will be explored. Further, the discipline of the student has been

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extended in this study from Chen and Volpe's (1998) division of business versus
non-business college major to include a wide variety of college majors in the sample
so that patterns within discipline groups can be explored.

METHODOLOGY

An online questionnaire was developed to measure knowledge, perceived

knowledge, and some self-reported actual behaviors. Behaviors relevant to all topics
could not be measured as most undergraduates had not yet experienced investment
or home purchase decisions. The questionnaire also sought demographic information
discussed above.
Actual knowledge using a panel of 30 basic personal finance
was assessed
questions (see Appendix A for a complete list of questions)—five each in six areas
of personal finance: (1) understanding debt; (2) investing; (3) insurance; (4) money
management; (5) retirement; and (6) taxes. Of the 30 questions, only three involved
numerical The questions were developed using a variety of resources
calculations.
including personal finance textbooks, the work of Chen and Volpe (1998) and the
assessment tool developed by the National Council on Economic Education's
Financial Fitness for Life (Rebeck and Walstad, 2005) for 4th -12th graders. The
questions were reviewed by a finance faculty member and by our university's Center
for Financial and Economic Education Director.
ofknowledge each respondent was asked to rate
In order to assess the perception
their level of agreement as to their comfort or proficiency regarding the six broad
categories listed above on a total of 16 questions in Appendix B for the list of
"perception" statements. The choices were rated using a 5-point Likert scale that
= = In order to assess
ranged from 1 Strongly Disagree to 5 Strongly Agree.
behaviors, each participant was asked to respond to questions regarding their use of
debt, money management, retirement planning, insurance, and whether or not they
understand how to complete a W-2 form. See Appendix C for the list of "behavior"
questions. Not all categories were assessed for behavior as the likelihood of a
student buying a house, for example, was fairly remote in the traditional college
setting in which the test was conducted.
To calculate the Knowledge score for a category (such as "Investing," or

"Understanding Debt") each respondent's knowledge answers were coded as "0" if

incorrect and "1" if correct. These values were then summed for all five questions
in the category for a maximum score per category of 5. To calculate the Perception
score for a category all the scores for the respondent's statements for that category
were averaged. Thus, if a person responded "Strongly Agree" (a score of 5) to every
be a 5.0.
perception statement in a category his perception average would
The questions and statements measuring demographic information, actual
knowledge, perceived knowledge, and actual behavior questions were mixed
interest through
throughout the survey. In part, this was done to hold the students'
a fairly lengthy survey and to avoid patterned responses. The questionnaire was

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administered to a group of 51 students as a pre-test. Minor adjustments were made
before it was fielded to the larger group.

RESULTS

The survey was fielded online to 13,012 undergraduate students at a traditional

public university which focuses primarily on undergraduate education in all major
disciplines with some graduate study available at the master's degree level.

Sample

Of the 13,012 e-mails sent with a link to the online survey, 1,783 students
responded after two separate e-mailings. After removing 580 incomplete surveys,
a final sample of 1,203 students remained which yielded a 9.23% response rate that
meets the criteria set by Hair, Bush and Otinau (2000) for the population size,
number of questions and type of study. The responses to the first e-mail and the
second e-mail were compared and no statistically significant differences were found.
Table 1 contains selected demographics of the survey respondents. The sample
profile is similar to the university student population in most respects with a few
specific differences that make it less than perfectly representative of the population.
In particular, the female response rate was higher than the population of female
students compared with male students. This response rate is in contrast to prior
research findings (Orr, Sherony & Steinhaus, 2007) which found male response
rates to online surveys to skew from females in comparisons of 2000 and 2005
responses.
A group of four male undergraduate students undertook the fielding of the
online survey as part of a marketing class. They were responsible for a number of
items including developing the cover letter for the e-mail. The e-mail that was sent
to the campus community was e-signed by the students and contained their pictures.
Dommeyer (2008) studied the effect of physical attractiveness of survey requests
upon response rates. The research demonstrated a strong link between attractive
photos and survey responses. The perceived attractiveness of the four senior-level
male students may have influenced the high percentage of female responses.
Additional descriptive data was collected with respect to the percentage of
students working versus those not working, parental income levels, ethnicity, age,
college (major) affiliation and class standing (freshman, sophomore, junior or
senior). Overall, with the exception of gender and possibly the number of students
working, the sample is a reasonably reliable indicator of the population of this study.

Financial Literacy—Knowledge, Perceptions and Actual Behavior

Table 2 contains the results for each question topic in the "Overall" column. For
all respondents the results ranged from a low of 15% correct on questions about

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 Table 1. Demographic Information

Population of Total

Sample of Undergraduate Undergraduate Students at the

University Students University

Information n=l,203 N=13,012
Employment Working (49.5%) Working (42.1%)*
status Not Working (49.1%) Not Working (57.9%)*
Age 18(14.8%) 18 (17.7%)**
19(19.1%) 19(18.5%)**
20(19.9%) 20(17.5%)**
21 (19.6%) 21 (17.4%)**
22(11.8%) 22(12.1%)**
Over 22 (14.8%) Over 22 (12.1%)**
Average age: 20.93 Average age: 21.19**
Class Freshman (18.9%) Freshman (30.2%)**
Standing Sophomore (18.2%) Sophomore (19.3%)**
Junior (28.8%) Junior (25.3%)**
Senior (34.0%) Senior (25.2%)**
Gender Male (30.3%) Male (44.4%)**
Female (68.5%) Female (55.6%)**
College/ Undecided (28.76%) Undecided/Uncommitted
Major (44.0%)**
Affiliation Humanities & Social Sciences Humanities & Social Sciences
(25.99%) (22.6%)**
Business & Economics (14.89%) Business & Economics

(8.5%)**
Education (6.39%) Education (7.1%)**
Science & Technology (13.62%) Science & Technology
(10.2%)**
Environmental Studies (5.05%) Environmental Studies
(2.4%)**
Fine & Performing Arts (2.86%) Fine & Performing Arts
(4.1%)**
Interdisciplinary (2.44%) Interdisciplinary (1.0%)**
Ethnic White/Caucasian (84.7%) White/Caucasian (76.5%)**
Background Black/African-American (1.0%) Black/African-American
(2.9%)**
Hispanic American (3.0%) Hispanic American (4.4%)**
Asian-American (4.1%) Asian-American (8.7%)**
American Indian/Alaska Native American Indian/Alaska
(1.0%) Native (2.5%)**
Other (6.24%) Other (5.2%)**
*National statistics from the U.S. Bureau of Labor Statistics (2009), specific
university statistics were unreliable.
students at the university from which the
**Population data is for the undergraduate
sample was derived and is from the same time period as the survey data collection.

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 Table 2. Overall Gender Results and Topic -
by Category Knowledge

Gender**

Overall Male Female

n=l,203 n=364 n=824

Category Topic % % %
Type of financial institution charging
highest interest rates 82 88* 80
Understanding
Factors determining a person's
Debt
creditworthiness 15 19* 13
Borrowing against equity in a house 43 54* 38
Mortgage points 19 24* 17
Relationship between interest rate and risk 78 82* 76
Aver ase
Average 47 53* 45
Liability insurance 88 89 88
Insurance Collision coverage 62 70* 58
Need for life insurance 20 32* 15
Whole life insurance policv 57 54 58
Deductible 66 73* 62
Aver
Average
ase 59 63* 56
Relationship between risk and reward 66 77* 61

Investing Criteria to consider when investing 85 91* 82

Stability of principal 49 67* 40
Time value of monev (conceptual) 74 78* 72
Compound interest (quantitative) 51 65* 45
Aver
Average
ase 65 75* 60
Gross vs. net pav 71 79* 67

Money Net worth 83 90* 79

Management Emergency fund 85 85 85

Checkbook balance (quantitative) 94 95 93
Budget (quantitative) 94 95 93
A ver ase
Average 85 89* 84
Factors influencing retirement savings 80 77 81
Defined benefit plan 15 23* 12
Retirement
Social Security benefits 63 60 65
Vested 32 34 31
IRA contributions 45 45 46
Aver
Average
ase 47 48 47
Example of a progressive tax system 75 76 74
Which taxes are paid by employer vs.
72 81* 68
Taxes employee
Allowable deductions for federal income
63 62 64
taxes
Estate taxes 37 45* 33
Itemizing deductions 49 50 48
Average
Aver ase 59 63* 57
*
statistically significant difference between Males anc Females at the 5% level or
better
**NOTE: Sum of males and females =
(364) (824) 1,188 as not all the 1,203
respondents coded Gender.

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 Table 3. Gender Comparison of Knowledge (K) and Perception (P)

[Values represent average overall score (with 5.0 being a perfect score
for a Knowledge category and 5.0 being the highest perception
of their own knowledge)]

All
Respondents Male Female
n=1203 n=364 II 00<N
ca II Tt"
oo1
(NI

Category K P K p
P K P
Understanding Debt 2.4 3.0 2.T
2.7a 3.3b 2.2a 2.8b
Insurance 2.9 2.6 3.2a 3.1" 2.8a 2.4b
2.4»

Investing 3.2 2.9 3.8a 3.3b 3.0a 2.8b

2.8»
-O
Money Management 4.3 3.5 4.4a cn OO
cñ 00 4.2a 3.4b
3.4»
Retirement 2.4 2.5 2.4 2.8" 2.4 2.4"
2.4»
Taxes 3.0 2.7 3.r
3.1a 3.1b 2.9a 2.6b
2.6»
a
statistically significant difference between Male and Female Knowledge at
the 5% level or better
b
statistically significant difference between Male and Female Perception at
the 5% level or better

credit-worthiness and the definition of a pension plan to a high of 94% correct

regarding calculations to determine one's checkbook balance and a basic budget.
The respondents correctly answered less than half of the Retirement (47%) and
Understanding Debt (47%) questions and performed the best with respect to the
Money Management (85%) questions. The overall percent correct for the entire set
of 30 knowledge questions was 60%. This would not be considered an acceptable
level of knowledge or indicative of "literacy" in personal finance.
While the respondents were not "literate" overall, they perceived themselves as
most knowledgeable in the area of Money Management followed by Understanding
Debt, Investing, Taxes, Insurance and Retirement. Respondents' low comfort level
in the area of Retirement is substantiated by the Knowledge results. However,

respondents perceived their knowledge in Understanding Debt to be quite high

when, in fact, their actual knowledge in this area ranked nearly as low as
Retirement, with respondents only correctly answering 47.4% of the Understanding
Debt Knowledge questions as shown in Table 3.
Actual financial behavior varied, and as described in subsequent discussions,
financial behavior varied by some of the variables mentioned in the literature review
such as gender and ethnicity. Highlights of overall actual financial behavior show
that the respondents:

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 • have an average of 0.83 credit cards,
• have "maxed out" about 0.21 of those at some point in their credit history, and
• tend to pay more than the minimum amount due, but less than the entire credit
card bill each month.

The majority of the respondents:

• have not transferred balances from one credit card to another,

• have not ordered a copy of their credit report in the past year,
• state that they fully understand how to complete a W-2 form, and
• have savings accounts.

About half of the respondents:

• use a budget to manage their spending,

• balance their checking accounts on a regular basis,
• record ATM/debit card transactions, and
• with car insurance, know what types of are included.
coverage

Finally, nearly three-fourths of respondents realize that upon graduation they

will have to make decisions regarding retirement benefits/packages such as 401 (k)
plans and IRAs. The majority of the respondents stated that they will start their
financial planning for retirement at some point between graduation and 10 years
after graduation. The fact that the respondents realize that retirement decisions will
need to be made in the near future is a sign of financial awareness. Other behaviors,
however, indicate a lack of awareness of many aspects of prudent personal financial
knowledge and practice.

Gender

Males statistically outperformed females on 18 of the 30 knowledge questions

(See Tables 2 and 3). Males outperformed females on every question dealing with
Understanding Debt and Investing. When grouping the questions by the six broad
categories, males statistically outperformed females in every Knowledge category
except Retirement.
Males perceived their knowledge to be higher than females in every
category
(See Table 3). This higher perception is supported by the data, except in the area
of Retirement. Both males and females lack knowledge in this area—indeed this
was the area with the overall lowest correct responses. However, actual behaviors
or actions were less consistently favorable towards male So, while
respondents.
male respondents:

• have an of 0.87 credit cards compared to an average of 0.81 credit

average

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 cards for females,
• are more inclined than females to order a copy of their credit report, and
• are more aware of what coverage is included with their car insurance than
females, male respondents:
• are less likely than females to record a debit or ATM transaction, and
• plan to begin financial planning for retirement later than females after

graduation.

Age

The average age of the respondents was 20.93 years. Distribution by age group
was fairly even as shown in Table 1. Table 4 demonstrates the differences between
knowledge and perceptions with respect to age.
Not surprisingly, the older the respondent, the better the performance. On
average, 18-year-olds correctly answered 54% of the questions while respondents
aged 22 or older correctly answered 68% of the questions. This result held across
all six Knowledge groups and is most pronounced for the Understanding Debt
group, followed by Taxes.
Respondents over age 22 perceived themselves as more knowledgeable in 13 of
the 16 questions, which is justified by the data. The main exception is in the area
of Investing where older respondents did not rate their perceptions higher, although
those over 22 scored higher in Knowledge than 18- and 19-year-olds. Thus, while
older respondents did not perceive their comfort level with this topic to be higher
than younger respondents, older respondents did know more than certain other age
groups. Older respondents are more likely to perceive that there is more that they
need to know.
With respect to financial behavior, younger respondents:

• had fewer credit cards (0.39) compared to 22-year-old respondents (1.37),

• are more likely to make full payments on their credit cards while older

respondents were more likely to pay something less than the full amount
owed, but more than the minimum payment,
• are far less likely (3%) to have transferred a balance from one credit card to
another than the average respondent over 22 (33%),
• are far less likely to have ordered copies of their credit report within the past

year (8% of 18-year-olds compared to 43% of those over 22),

• are less likely to have "maxed out" their credit cards,
• are more likely to have a savings account,
• are more likely to record ATM/debit card transactions (54% of 18-year-olds
vs. 38% of those over 22), and
• are less knowledgeable about what types of coverage are included with their
car insurance (80% of those over 22 compared to 46% of 18-year-olds).

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 Table 4. Age Comparison of Knowledge (K) and Perception (P)

[Values represent the difference in the average

overall score of row minus column3]

19 20 21 22 Over 22
(n=230) (n=239) (n=236) (n=142) (n=178)
Understanding
Debt K P K P K P K P K P

(n=178) 18 -.11 -.01 -.36* -.06 -.47* -.04 -.65* -.23 -.96* -.53*
19 -.25 -.05 -.36* -.03 -.54* -.22 -.84* -.52*
20 -.11 .02 -.29 -.17 -.59* -.47*
21 -.18 -.19 -.48* -.49*
22 -.30 -.30*
Insurance K p K P K P K P K P

(n=178) 18 -.21 -.01 -.28 .04 -.39* .01 -.52* -.21 -.70* -.51*
19 -.07 .05 -.17 .02 -.31 -.20 -.48* -.50*
20 -.11 -.03 -.24 -.26 -.42* -.55*
21 -.13 -.23 -.31* -.52*
22 -.17 -.29
Investing K p K P K P K P K P
(n=178) 18 -.19 -.05 -.36 -.02 -.47* -.10 -.72* -.20 -.71* -.28
19 .03 -.27 -.05 -.53* -.16 -.52* -.23
20 -.11 -.08 -.37 -.18 -.35 -.26
21 -.26 -.11 -.24 -.18
22 .01 -.07

Money
Management K P K P K P K P K P

(n=178) 18 -.11 -.13 -.27* -.21 -.24 -.23 -.42* .37* -.53* -.46*
19 -.16 -.08 -.12 -.10 -.31* -.24 -.42* -.33*
20 .03 -.01 -.15 -.16 -.26 -.24*
21 -.18 -.14 -.29* -.23
22 -.11 -.09
Retirement K P K P K P K P K P
(n=178) 18 -.02 -.01 -.17 -.05 -.11 -.13 -.38* -.27 -.51* -.34*
19 -.15 -.04 -.09 -.11 -.36* -.26 -.49* -.33*
20 .06 -.08 -.21 -.22 -.34* -.29
21 -.27 -.15 -.40* -.21
22 -.13 -.07
Taxes K P K P K P K P K P
(n=178) 18 -.10 -.03 -.21 -.11 -.37* -.07 -.58* -.26 -.83* -.76*
19 -.11 -.08 -.27 -.04 -.48* -.23 -.72* -.72*
20 -.15 .04 -.37* -.15 -.61* -.64*
21 -.22 -.19 -.46* -.68*
22 -.24 -.49*
*
statistically significant difference between age group at the 5% level or better
a
For example, when comparing the Understanding Debt category,
18-year-olds
scored lower, on average, than those Over 22 by -0.96.

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Table 5. Employment Status Comparison of Knowledge (K) and Perception (P)

[Values represent average overall score (with 5.0 being a perfect score
for a Knowledge category and 5.0 being the highest perception
of their own knowledge)]

Currently Not Currently Employed

Employed (n=591)
(n=596)
Category K P K P
Understanding Debt 2.5"
2.5a 3.0"
3.0" 2.3"
2.3a 2.9"
Insurance 3.0 2.7" 2.9 2.6"

Investing 3.3 3.0 3.2 2.9

Money Management 4.3"
4.3a 3.6" 4.2"
4.2a 3.5b
Retirement 2.4s
2.4a 2.6 2.3a 2.5
Taxes 3.0"
3.0a 2.8b 2.9"
2.9a 2.6"
2.6"

astatistically significant difference between employment

Statistically groups' Knowledge at the
5% level or better
b statistically significant difference between employment groups' Perception at the
5% level or better

Employment Status

Approximately one-half of the sample is working at either a full- or part-time

job while attending college. Differences regarding knowledge and perceptions with
respect to employment are shown in Table 5.
Employment status did not add much
knowledge. Employed individuals
statistically outperformed unemployed respondents on only six of the 30 questions,
with those questions dispersed across the six categories. Some of these questions
related to the difference between gross and net pay, employee-paid vs. employer
paid taxes and a simple tax question, which is not surprising.
Employed respondents had higher perceptions of knowledge than unemployed
respondents in every category except Investing (justified because the two respondent
groups statistically scored equally on this Knowledge group) and Retirement (not
justified because the Employed respondents outperformed Unemployed here).
Employed respondents rated their perception higher in the area of Insurance, which
does not appear to be justified as Unemployed and Employed respondents
statistically scored equally in the Insurance
Knowledge category.
Employed respondents' behavior varied slightly from unemployed respondents
but not in a consistent or predictable manner with the possible exception of credit

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 Table 6. Ethnic Group Comparison of Knowledge (K) and Perception (P)

(Values represent average overall score (with 5.0 being a perfect score for a
Knowledge category and 5.0 being the highest perception of their own knowledge)]

Caucasian Non-Caucasian
(n=1004) (n= =181)
Category K P K P
Understanding Debt 2.4"
2.4a 3.0
3.0 2.1"
2.1a 3.0
3.0

Insurance 3.0"
3.0a 2.6 2.6a 2.6
O"
Investing 3.3"
3.3a u>
3.0b
o 2.9a 2.8b
Money Management 4.3"
4.3a 3.6 4.0a 3.4

Retirement 2.4"
2.4a 2.5
2.5 2.2"
2.2a 2.5
Taxes 3.0 2.7 2.8 2.7

a
statistically significant difference between ethnic groups' Knowledge at the 5%
level or better
b
statistically significant difference between ethnic groups' Perception at the 5%
level or better

cards. Employed respondents have one credit card on average, compared to 0.66
credit cards held by unemployed respondents.

Ethnicity

Knowledge, perceptions and behaviors were evaluated across ethnic groups (see
Table 6). Because the sample (and population) was predominately Caucasian (85%)
and the remaining ethnic groups each had only a small number of respondents the
sample was divided into two groups: Caucasian and Non-Caucasian (Table 1 gives
a full breakdown of ethnicities).
Caucasians statistically outperformed Non-Caucasians on every Knowledge
group except Taxes. However, while Caucasians outperformed Non-Caucasians in
nearly every Knowledge group, there were no statistically significant differences in
Perception of knowledge between the two groups except in the area of Investing,
where Caucasians had a higher perception of their own knowledge. The lack of a
statistically significant difference with respect to the Perception of Knowledge is
alarming when compared with the finding of a significant difference as to actual
knowledge between Caucasians and non-Caucasians.
Caucasian respondents were generally more prudent than non-Caucasians with
respect to their financial behaviors, although the results are mixed. For example:

• 47% of Caucasians balance their checkbook to 53% of

regularly compared

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 non-Caucasians,
• Caucasians have fewer credit cards (0.80) compared to non-Caucasians (0.95),
on average,
• more Caucasians (63%) than non-Caucasians (51%) pay the full amount on
their credit card each month, and
• non-Caucasians tend to transfer balances more often across credit cards (19%
vs. 10% for Caucasians);

however,

• non-Caucasians are more likely to record ATM transactions (46% vs. 40% for
Caucasians), and
• more non-Caucasians (23%) have ordered a copy of their credit report in the
past year than Caucasians (16%).

Source of Financial Knowledge

Respondents were asked where they learned about personal finance. The
choices included non-academic sources, such as family, talking with friends, media,
and managing one's own funds; as well as academic sources, such as a bank or
credit union class, high school personal finance or economics class, college personal
finance or economics class, other courses, or other sources. The respondents could
choose all that applied. The respondents were then coded as to whether they
obtained their knowledge from academic, non-academic or "both"
(See sources
Table 7).
Not surprisingly, respondents who learned about personal finance from both
Academic and Non-Academic sources (category Both) scored significantly higher
in financial knowledge than those learning from purely Non-Academic sources on
Understanding Debt, Insurance and Investing. There were no statistically significant
differences in Knowledge results for Academic vs. Non-Academic groups or the
Academic vs. Both groups.
Respondents in the Both category have a statistically higher perception of their
comfort level in all six areas compared to the Non-Academic group. This higher
perceived comfort level appears to be justified for the Understanding Debt,
Insurance and Investing areas, but not for Money Management, Retirement or
Taxes. Those in the Both group have statistically higher perceptions of knowledge
of Taxes than the Academic group. No statistically significant difference exists
between any of the six Perception areas for the Academic vs. Non-Academic groups.
who learned about personal finance from both academic and non
Respondents
academic sources:

• have 0.84 credit cards on average compared to 0.82 for the Non-Academic

group and 0.68 for the Academic group,

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 Table 7. Source of Literacy Comparison of Knowledge (K) and Perception

(P) from academic or non-academic sources

of row minus column3]

[Values represent the difference in the average overall score

Non-academic Both
Category (n=533) (n=629)
Understanding Debt K P K P

(n=28) Academic 0.07 -0.11 -0.23 -0.36

Non-academic -0.31* -0.24*
Insurance K P K P

(n=28) Academic -0.17 0.01 -0.34 -0.29

Non-academic -0.18* -0.30*

Investing K p K P

(n=28) Academic 0.08 0.29 -0.38 -0.12

Non-academic -0.47* -0.41*

Money Management K P K P

(n=28) Academic -0.19 -0.05 -0.26 -0.37

Non-academic -0.07 -0.32*
Retirement K P K P
(n=28) Academic -0.18 0.28 -0.19 0.05
Non-academic -0.01 -0.24*
Taxes K P K P
(n=28) Academic -0.38 -0.21 -0.54 -0.51*
Non-academic -0.16 -0.30*
*
statistically significant difference between groups at the 5% level or better
■"statistically
Tor example, when comparing the Understanding Debt category those gaining
aFor
knowledge from only Academic sources underscored those receiving knowledge
from Both sources by -0.23, whereas those receiving knowledge from only Non
academic sources underscored those in the Both group by -0.31.

• tend to use a budget to manage their spending (50%) as compared to the Non
Academic (44%) and Academic (37%) groups,
• were slightly more likely to have a savings account (92%) compared to Non
Academic and Academic groups (each at 89%), and
• were more likely to pay the full balance on their credit card each month (66%

compared to only 61% of the Non-Academic and 45% of the Academic

groups).

However, only 43% of the Academic group regularly balanced their checking

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account compared to 50% of the Non-Academic and 48% of the Both groups.

Other Variables

Significant differences were found between academic disciplines. Students

majoring in Business outperformed all other majors in all Knowledge categories,
with the exception of students majoring in Science and/or Technology. Business
majors also had statistically higher perceived knowledge levels than other majors
in nearly all areas—perceptions that, for the most part, were justified. Business
students were apt to actually use budgets (56%) as compared with other disciplines
such as Education where only 38% use budgets. Interestingly, business students
also have the most credit cards on average (1.29). Students who have yet to decide
upon majors reported having the fewest credit cards, which is not surprising given
that they are most likely freshmen and sophomores. About a third of Business
majors have ordered a copy of their credit report whereas only 10% of Education
majors have done so.
The educational background of the mother and the father impacted student
attention to credit scores. Students from households with parents without high
school educations pay closer attention to their credit scores. This group also had
more credit cards and is less likely to pay off their balances monthly. They are more
likely to transfer balances from one credit card to another as compared to students
whose parents graduated from college. Students from higher income households
(incomes over $80,000 annually) tend to overestimate their financial knowledge
which implies that they could be less likely to enroll in a personal finance class.

IMPLICATIONS

This reearch supports several crucial previous findings: (1) financial literacy is
at a very low level among college students, (2) females, non-Caucasians, and non
business majors underperform relative to males, Caucasians and Business majors,
respectively, and (3) younger students know less than older students. Additionally,
the findings imply that the closer the "need to know" is perceived, the more the
students actually realize the relevance of the knowledge acquisition and the greater
the actual knowledge Employment did not seem to have much effect on
becomes.
knowledge, perceptions or behaviors, unlike some earlier studies. Behaviors seem
to trend with knowledge levels; however, there are notable exceptions.

Implications for Increasing Knowledge

The finding that women continue to know significantly less than men runs
counter to all the advances women have achieved in terms of employment
in the last few decades. Either through continued socialization that
opportunities
tends to channel women away from the mathematical and scientific fields, or for

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other reasons, women either do not realize how much they do not know or, as this
study demonstrates, they realize how much they do not know and either haven't
received the training, or haven't learned from that training to the degree that males
have learned. It is likely that the same training has been offered to women as to men
in the school setting. Therefore, the lack of knowledge could be coming from the
home or from peers. Since personal financial knowledge is critical for both men and
women in today's world and in the future, educational offerings at both the college
level and pre-college level is imperative.
The need for pre-college personal finance education implies the probable need
for training K-12 educators on what and how to teach personal finance topics. Little
research has been done in the area of teacher preparation in the area of financial
education. The No Child Left Behind Act requires that for teachers to be considered
"highly qualified" to teach a topic they must have earned a subject-specific degree
or have taken 24 credit-hours of college level coursework in the area, or they must
pass a rigorous state competency exam. A national survey of K-12 educators (Way
and Holden, 2009) indicates that by this standard, there are few K-12 educators
nationwide who are "highly qualified" to teach personal finance. Introductory
micro- and macro-economics courses, which have historically devoted minimal class
time to personal financial education, are the most commonly cited sources of
collegiate level financial education for the 37% of teachers who reported having any
academic background in this area. Given that the study found that educators who
had taken college-level courses in personal finance were more likely to identify
themselves as being competent to teach personal finance, it is not surprising that the
majority of educators reported that they did not feel competent to teach personal
finance. Believing that one has adequate mastery of the content matter is a
necessary, but not a sufficient condition for educators to integrate a subject area into
their curriculum. They also must have knowledge of and be comfortable with the
pedagogy, and here pre-service teacher preparation courses appear to fall even
shorter of the mark. Fewer than 3% of teachers indicated receiving any collegiate
level preparation in personal financial education methods.
The absence of such training at the pre-service level could potentially be
compensated for by post-collegiate training in the form of non-credit workshops.
Unfortunately, fewer than 20% of educators report having attended a workshop on
a topic related to personal finance in the last three years (Way and Holden, 2009).
The most frequently attended workshops were those presented by financial planners
or financial institutions. Such workshops are often focused on topics such as
retirement planning or budgeting as they relate to the personal needs of educators.
Only 12% attended a workshop that focused on teaching personal finance at the K
12 level. This highlights the need for non-credit workshops that integrate both
content and methods to meet the needs of practicing teachers.
The findings with respect to knowledge, perceptions and actions of education
majors, particularly as compared to other discipline majors, indicates that more
training of education majors is needed. Having education majors instructed in

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personal finance would be a minimum requirement under this scenario, and training
on how to teach different aspects of financial literacy, depending on pre-college
teaching field, would be optimal.
The findings with respect to Knowledge have implications for curriculum
content. Since Money Management is basically understood, topics such as basic
budgeting and balancing a checkbook probably need not be covered at the college
level. However, in order to fund retirement spending (which is poorly understood),
saving must occur, particularly if one follows the longer term economic models of
Ando and Modigliani (1963). Since saving should be a component of budgeting,
money management issues can form a basis for later lessons on interest and
retirement where knowledge is deficient. Teaching students about the time value of
money would help them understand the opportunity cost of current consumption and
the importance of beginning to save for retirement while young. Tools such as
calculating the value of not buying a daily latte (Shaw, 2006) can help students
realize the future value of managing their money.
Improved understanding of money management can also make the topic of
Retirement more relevant to college students. Retirement knowledge has become
increasingly important as employers transfer more responsibilities to employees in
this area. Students will commonly be asked to make retirement and investment
decisions or days of beginning their first jobs. Care should also be
within weeks
taken to develop gender- and ethnic-specific examples, particularly those geared to
females and non-Caucasians to increase the incentive for these groups to enhance
their knowledge in this area.
The results indicate that learning about personal finance in non-academic
settings is not the best option. Coupling academic learning with non-academic
resources appears to improve one's knowledge in key areas. Thus, the inclusion of
a personal financial course at the college level should be of significant value to most
students. Respondents to this survey indicated their strong interest in taking a
personal financial literacy course, especially if it satisfies a university requirement
(73% stating they would be Very Likely or Likely to take a course under this
scenario).
The college students whose parents have lower levels of earnings and who also
have lower levels of education need more help in many areas than some other
students. Identification of these students and course advising could help them find
their way.

Implications Provided by Perceptions of Knowledge

Analyzing students' perceptions of their financial knowledge is illuminating.

Non-Caucasians had similar perceptions regarding their financial literacy when
compared to Caucasians; however, non-Caucasians statistically underperformed in
terms of actual knowledge. Older students tended to know more than younger
students but in many cases there was no statistical difference in the perception of

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knowledge. This finding indicates that older students may not perceive they know
as much as they seem to, or, at the very least, they are uncomfortable with their
knowledge set. Conversely, younger students do not perceive they know less than
they think they do. It may be difficult to encourage people to take a course on
personal finance if they perceive they know more than they actually do. This could
be partially remedied by the K-12 system. If the need for an understanding of
personal finance is broached in the lower grade levels and more in-depth courses are
offered at the college level, the university student is more likely to recognize the
relevance of the material. Overcoming perceptions in order to help students decide
to seek out personal financial education indicates the need for strategic plans to be
implemented that would make taking a personal finance course required or
perceived as beneficial in some way to the student. At the university used in this
research, the Personal Finance course was made an option in the General University
Requirement set of courses. The course has filled to capacity every time since that
change was made. An information campaign including articles in the student
newspaper also helped to catch the attention and interest of students. However,
more "marketing" of the course to the lower-performing groups, such as women, is
needed. Finding ways to help students understand the future benefits that will
accrue to them personally from additional knowledge and the impact upon their
future that their current lack of knowledge can have is needed.

Implications from Behavioral Findings

One of the more disturbing findings was that only 15% of the respondents knew
the factors determining credit-worthiness although their actions clearly show that
they are borrowing money. For 18- to 22-year-olds to have a low understanding
regarding retirement issues is perhaps to be expected as it is doubtful few, if any,
have yet begun to save for retirement. However, the majority of the respondents are
engaged in borrowing and they are equally illiterate on this subject as they are on
retirement. Respondents tend to perceive that they understand debt, but they do not
exhibit a great deal of knowledge or prudent behaviors concerning debt-related
issues.
Older respondents exhibited interesting characteristics in terms of their
behavior. Compared to younger respondents, they had more credit cards, fewer paid
their credit card bill in full monthly (implying a buildup of a "permanent" credit card
debt level), they were less likely to have a savings account, and less likely to record
ATM/debit card transactions. The reason for this is uncertain. It appears as though
the younger students started off with good intentions, and then went astray as they
aged, incurred student loans, and/or mismanaged their money. Peer pressure or
other pressure for acquisition of material objects, easy credit card acquisition or bad
habits learned from other students could be at fault. If they are better educated by
the time they are age 18 or 19 other pressures may have less effect. However,
perception of personal knowledge about debt was high, and actual knowledge about

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debt was greater with the older age groups, but behavior didn't match knowledge.
Hence, other pressures seem to be affecting debt-related behavior causing the
incidence of "maxed-out" credit cards, balance transfers, not checking their credit
reports and paying less than the total amount due. Consequently, it is imperative
that further research be undertaken to gain a better understanding of the pressures
affecting debt-related behavior. Lessons and case studies showing the impact of
high debt levels need to be part of the education offered.
Respondents, especially females, perceive the need to start saving for retirement
and many plan to do so within a decade or so after graduation. Given females'
longer life spans, their propensity to begin financial planning for retirement sooner
than males is prudent. If they graduate at age 22 and begin to save around age 30,
this seems reasonable even though the opportunity cost of delaying savings for eight
years is high. Along with the survey data, this demonstrates that overall, the
students' intentions (with respect to retirement planning) are good, but their
knowledge is inadequate. Further, the idea of retirement is not part of the student's
current world and therefore interest and motivation to learn about retirement
as a 401 (k) plan allocation
planning, or even rudimentary retirement decisions such
is not on
(which will most likely be facing them upon employment after college),
their agenda.
How do educators motivate students to learn things they don't think they need
to know yet? Communication to students about what they need to know as part of
and resources at a
getting their first job upon graduation could help. People
from placement
university, beyond the personal finance faculty, can help. Advising
offices on campus would be a good resource in many cases. Students' college years
offer a prime time to introduce the concept of time value of money and the benefits
of beginning to save for retirement when one is still young. Additional emphasis on
the fact that females tend to outlive males and will have to manage their own
financial assets at some point in their life needs to be communicated to the entire
to be broached in a wide spectrum
population of college students. These topic need
of college courses and professors across a campus should be recommending that
students take a course in personal finance. The finding that women know
finance should serve as a "wake-up call" for many
significantly less about personal
college women. Finding ways to train other college professors to incorporate the
social and economic impact of financial illiteracy would also be helpful.

FURTHER RESEARCH AND LIMITATIONS

This study would be enhanced by using multiple colleges and universities with
a variety of student bodies in order to see if the results hold under differing
to
conditions or if they vary by individual school or school type. This would help
a broader with more
make the results more meaningful to population. Samples
and racially diverse populations would also enhance understanding of
ethnically
what appears to be a problematic area.

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 An essential component of a successful pedagogical or curriculum change is the
measurement of the knowledge acquired and potentially the application of this
knowledge. Lyons, Palmer, Jayaratne and Scherpf (2006) make a good case for
individual and national evaluations of the effectiveness of financial education
programs. Evaluating the effectiveness of financial literacy programs at the college
level is clearly needed. Pre- and post-educational experience testing in a personal
finance course, as well as college programs in general, would help to verify the
assumption is the primary answer to the lack of financial knowledge
that education
among college students as well as other populations.
A population besides college students is critical as well. The financial literacy
of high school students has been examined in surveys, the best known of which have
been conducted by JumpStart. Jump$tart has been conducting national surveys
every two years to measure the financial knowledge of high school seniors. The
average score on the baseline 1997-1998 survey was 57.3%. The average score in
the most recent survey (Mandell, 2008) was 48.3%. Effective remedies for the
generally low levels of knowledge need to be researched and determined. The
success rate of employer-sponsored financial literacy efforts would be helpful to
know. Also, it would be beneficial to know more about programs offered through
nonprofit groups and support of on-campus efforts that are not part of the
curriculum, possibly with finance or accounting societies participating. In general,
the alarming extent of the financial literacy problem is becoming better understood,
but the solutions have been under-researched and not adequately adopted.

ENDNOTES

1
Acknowledgement: The authors wish to thank the WWU graduates Spencer
Covich, Thomas Evans, Jordan Maughan and Simon Trigg without whom this
research would not have been possible.

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Way, W. L., and K. C. Holden. "Teachers' Background and Capacity to Teach
Personal Finance: Results of a National Study," Journal of Financial Coun
seling and Planning, 20 (2009), 64-78.

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 APPENDIX A

Knowledge Assessment Survey Questions

(multiple choice - 4 answer options]

Category Question (Q) and Answer (A)

Understanding Debt Q: Which three things do creditors consider to be most
important when judging a person's creditworthiness to
buy a house or car?*
A: Character, collateral and capacity
Q: What is the relationship between the interest rate
charged an individual and a person's risk of
nonpayment of a loan?*
A: The higher the risk of nonpayment, the higher the
interest rate
Q: Which type of financial institution typically charges
the highest interest rates for loans?*
A: Payday loan companies
Q: Which of the following statements is true?
A: Homeowners can borrow against the equity they
have in their homes.
Q: Which of the following represents fees paid by a
home buyer to the mortgage lender?
A: Points
Insurance Q: Which type of insurance protects a person from loss
from lawsuits?*
A: Liability
Q: Which is the best description of collision coverage
in an auto insurance policy?*
A: It provides for the repair and replacement of the
policyholder's car if it is damaged in an accident.
Q: Suzy backed her car into a metal fence causing
$500 of damage to her car. Suzy has an auto insurance
policy with a $200 deductible. To get her car fixed,
how much will the auto insurance company pay?*
A: $300
Q: A whole life insurance policy offers protection:*
A: During the lifetime of the insured and builds cash
value.
Q: Which of the following statements is true?
A: Not everyone needs life insurance.

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 Investments Q: Charlie opens a savings account and deposits $500.
If the savings account has a fixed annual interest rate of
5%, offers compound interest, and Charlie makes no
additional deposits or withdrawals, what amount will
he have in his savings account at the end of two
years?*
A: More than $550
Q: Beginning to save while you're young is
recommended by financial experts because it:*
A: Lets compound interest work in your favor by
earning interest on interest.

Q: What is the general relationship between risk and

reward?*
A: The higher the risk, the higher the potential reward
Q: What are the three most important criteria to
consider when investing?*
A: Risk, rate of return, liquidity
Q: Which of the following investments offers the
greatest stability of principal?
A: U.S. Treasury bills
Money Management Q: What is the difference between gross and net pay?*
A: Net pay is gross pay minus deductions.
Q: A positive net worth means that:*
A: Assets are greater than liabilities.
Q: This is Marie's checking account register:
Check #
Date
Item Description
Deposit
Withdrawal
Balance

5/14/08
Beginning balance

$500
500
5/15/08
Century Auto Parts

$100

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 5/31/08
Paycheck
$200

501
6/2/08
Best Clothes

If Marie writes a check for $50 at Best Clothes, what is

her new balance?*
A: $550
Q: An emergency fund:
A: Should be kept in the form of readily-available
assets (such as a savings account) and should be
approximately three to six months of your income.
Q: Sam's net pay totaled $2,000 this month. He spent
$600 on rent, $300 on food, $400 on his car payment,
$200 in utilities and $200 on other expenses. How
much does he have left for savings?
A: $300
Retirement Q: Which of the following statements is true?
A: The age at which a person can receive Social
Security benefits is slowly increasing.
Q: Which of the following factors does not influence
how much you should be saving for retirement?
A: Age, desired retirement income, tax rates and
expected return on your retirement savings all have an
impact.
Q: Which of the following retirement plans offers a
guaranteed fixed annual payment to the retiree?
A: Defined benefit plan
Q: If you are "vested" in your retirement plan:
A: Contributions made by your employer to your
retirement plan will remain even if you leave your job
Q: Which of the following statements is true?
A: Contributions to a regular IRA are tax deductible
up to a limited amount whereas contributions to a Roth
IRA are not tax deductible.

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 Taxes Q: Which of the following represents a progressive tax
system (i.e., those who earn more pay a higher
percentage of their income toward this tax)?
A: Federal income tax
Q: Of the following taxes which one is paid for partly
by the employer and partly by the employee?
A: Social Security tax
Q: Which of the following statements is true regarding
estate taxes?
A: If the value of the estate is less than a certain
amount, no federal estate taxes need to be paid.
Q: Which of the following is not generally an
allowable deduction for federal income taxes regardless
of the amount?
A: Neither interest paid on credit card debt nor interest
on a car loan are generally allowable deductions
Q: You are single with no dependents and you claim
yourself as an exemption for federal income tax
purposes. The standard deduction is $5,350. The
deductible interest on your mortgage totals $10,700 this
year. You should:
A: File Form 1040 and itemize deductions.
*Rebeck and Walstad (2005], Questions used with permission from the Nationa
Council on Economic Education.

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 Appendix B

Perception Statements (Rated from 1 (Strongly Disagree) to 5 (Strongly

Agree) the level of agreement with each statement]

Category Statement
Understanding Debt I know what makes me a good or bad credit risk.
I understand what affects the credit terms I am offered
by different lending institutions.
Insurance I feel comfortable with my ability to make decisions
about what kind of life insurance (if any) to purchase
in the future.
I understand the difference between various types of
insurance.
I understand the difference between the different
types of automobile insurance.
Investing I am comfortable with my ability to make decisions
about savings instruments based on their fixed and
compounded interest rates.
I understand the general relationship between risk and
reward in investing.
I feel confident in my understanding of the
differences between bonds, stocks, U.S. Treasury bills
and mutual funds.
I feel comfortable with my understanding of the
various financial terms that go along with buying a
home someday.
Money Management I understand what personal net worth means.
I am confident in my ability to write a monthly
budget.
I am proficient at balancing my checkbook.
Retirement I feel comfortable with my ability to financially plan
for my retirement.
I feel comfortable with my ability to make decisions
about pension plans, 401(k)s, and IRAs when
required to do so.
Taxes I understand what an employer's responsibility is
with respect to social security taxes.
I feel comfortable filling out and filing my own
income taxes.

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 Appendix C

Behavior Questions (Variable answers depending upon question]

Category Question
Understanding How many credit cards do you use?
Debt How many of your credit cards have ever been "maxed
out"?
What amount of your credit card bill do you normally pay
each month?
What is the primary reason that you use a credit card?
Have you ever transferred a balance from one credit card to
another?
Have you ordered a copy of your credit report in the past
year?
Insurance Do you know what type(s) of coverage are included with
your car insurance?
Money Do you use a budget to manage your spending?
Management Do you have a savings account?
Do you balance your checking account regularly?
When you use your ATM or debit card, do you record the
amount somewhere?
Retirement When I graduate and get my first job, I know that I will have
to make decisions about 401(k)s, IRAs, etc.
When will you begin financial planning for your retirement?
Taxes Do you fully understand how to fill out a W-2 form?

30 Journal of Financial Education

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