Most disconcerting is the finding that almost three-in-four students [73%] thought that ‘Using a payday lender was a really good choice if you just need money for a short amount of time’. Fees and interest charges attached to payday loans, when extrapolated to a one-year term, can be in excess of 500% – a last resort borrowing option at best.
The concept of interest, in general, is a tough one for students and a key area that parents and educators should focus on at home and in-class.
Only 57% of the 339 students, who completed the financial literacy knowledge assessment, knew that they would be paid interest on money held in savings accounts. Most students are aware that interest must be paid on bank loans and credit cards, although just over half would try to get a low interest rate when borrowing.
Another area of difficulty for students is the impact that time and interest rate have on total borrowing costs and cost of goods. Students don’t quite get that the longer you take to repay borrowed money the more interest you will have to pay.
The majority of middle school students [63%] felt ‘that paying only the minimum required monthly payment on a credit card was the best way to get credit cards paid off quickly’.
Things get a little fuzzy for middle school students when it comes to understanding the impact that the interest rate has on the amount of interest earned on savings or charged on borrowed money. Just over one-third of the students were aware that banks pay a lower interest rate on savings than the interest rate they charge on credit card balances and only half of those assessed knew that things would cost more if bought with borrowed money instead of using money they have saved.
“When students are made aware of the increased cost of things purchased using borrowed money they are truly shocked,” said Tricia Barry, Executive Director of Money School Canada. “Making young people aware of the impact that interest charges can have on their overall purchasing power is fundamental. Forming early attitudes towards responsible spending, using credit wisely and living within your means can make the difference between financial success and financial disaster for young people over the long-term.”
Knowing the language of personal finance is an important part of the financial literacy educational equation. “Familiarity with personal finance terms can help students to become more aware of money matters in their daily lives,” said Ms. Barry. Toronto students showed a marked improvement on a number of the personal finance vocabulary questions over last year’s assessment results.
Money management is a big topic and knowing where to start can often be overwhelming for parents and teachers. The Money School Canada What Tween$ Know Financial Literacy Assessment results help parents and educators to zero in on areas where they can make the most significant impact on a young Canadian’s financial literacy learning journey.
STUDENT FINANCIAL LITERACY ASSESSMENT METHODOLOGY
Money School Canada conducted a 30 question financial literacy assessment with 339 Grade 7 & 8 students in the GTA as part of a knowledge benchmarking exercise for students participating in in-class financial literacy workshops. Select findings from the student assessment exercise are presented. Student questions have been paraphrased for presentation. Students were provided with a series of plain language, money-related statements centered in basic money management vocabulary and concepts. A multiple choice format was used where students were asked to select from four possible responses including: 1] True, 2] False, 3] Not Sure and 4] New Word. The expanded suite of possible answers, beyond simply True or False, ensures a higher integrity in the results as guessing is reduced [a 50/50 chance of a correct answer] and, with the option to indicate if a certain word is new to the respondent – “I don’t understand the statement therefore I can’t answer”, there is greater assurance that the student’s financial literacy is being measured rather than their proficiency with the English language. The addition of a ‘New Word’ answer option is a critical aspect in this type of financial literacy knowledge assessment, particularly in cases where there is a higher concentration of ESL students, such as in the GTA. Percentage correct data reflects those students who chose the correct answer – all other answers were considered incorrect. The financial literacy assessment was completed between November 2011 and October 2012. A probability sample of this size yields results accurate to ± 4.4 percent, 19 times out of 20.
ABOUT MONEY SCHOOL CANADA www.moneyschoolcanada.com
Money School Canada, established in 2009, offers customized, in-class financial literacy workshops to students in Grade 4 – 11. Thousands of students have enjoyed a comprehensive introduction to money management essentials, delivered right in the classroom, by professional financial literacy educators. Money School Canada workshop facilitators are passionate and draw on rich, hands-on experience, gained through years working in financial services, to dispel student money myths on-the-spot and to answer questions fully and accurately. Money School Canada’s financial literacy workshops offer a truly superior financial literacy learning experience for students. Face-to-face, right in the classroom, where students want and expect to learn.
Financial literacy workshops are tailored to junior, middle, and high school classes. On average, class financial literacy assessment scores increase by an outstanding 25% over a lively, interactive three hours of instruction – delivered over three weeks in memorable and digestible one-hour lessons.
Students love the workshop which introduces them to the essentials of Financial Goal Setting & Savings, Budgeting, Interest, What Banks Do [and how they make money], and Borrowing & Credit. Classroom teachers consistently assign top marks and all indicated they felt more comfortable teaching financial literacy to their students after Money School Canada visited. All teachers indicated they would recommend the Money School Canada program to colleagues. Workshops are endorsed by the TDSB Financial Literacy Steering Committee. For more information please visit http://www.moneyschoolcanada.com