ABSTRACT

The purpose of this pretest-posttest group study was to test the theory of cognitive and intellectual development and successful financial goal-setting that relates the curriculum of a high school financial planning program to the outcome of the self-assessment questions posed at the completion of the study. The curriculum was ,Your Financial Plan, Unit 1,  written and distributed by the National Endowment for Financial Education (NEFE).  In response to U.S. financial literacy initiatives, there has been an increased commitment to improve students’financial literacy. A high school financial planning program completed by 248eighth-grade students was the focus of this research. Students’financial literacy was assessed at the beginning of the program and was retested approximately 3 months after program completion.  The study was designed to assess spending behavioral changes when making personal financial management decisions and whether eighth-grade students understand using short-term, intermediate or long-term goals to change behavior. Results of this study (1) add to a body of knowledge about youth financial education and

Keywords: financial literacy, National Assessment of Educational Progress (NAEP), high school financial planning program, National Endowment for Financial Education (NEFE), Council for Economic Education (CEE)

CHAPTER ONE: INTRODUCTION

Financial literacy is a necessary skill for students emerging from U.S.high schools and universities.  Without proper knowledge of personal financial management techniques, a student graduating from high school or college will be unable to navigate financial systems.  The results of young adults being unable to navigate financial systems will not only be detrimental to the student and his family, but also the economy as a whole.  A cycle of financial illiteracy for any society will eventually lead to it’s demise.  Teaching proper personal financial management techniques to students at the middle school and high school levels is important.  It is imperative that personal financial management techniques are taught, and students also tested for learning. This dissertation is the result of a quantitative study performed to determine the effectiveness of teaching personal financial management to eighth-grade students.Eighth-grade students who participated in a state-approved curriculum of personal financial management were tested to assess their comprehension of short-term, intermediate, and long-term financial goal setting.  The survey was administrated to test the motivation of the students to change their spending behaviors after being taught financial goal-setting techniques.  The proposed research may benefit the financial literacy of the next generation of U.S. students in three ways.  First, it may create more awareness of eighth-grade students’ levels of understanding of basic personal financial concepts.  Second, it may clarify, based on eighth-grade students’ level of cognitive and intellectual development, which financial concepts can be understood and practiced.  Third, the research may contribute to the knowledge base of appropriate financial concepts and appropriate financial goal-setting techniques for educators of personal financial management.

Once students’ capabilities are understood, leaders of the educational community can be better prepared to focus on personal financial management skills and gaps at the middle school level. This first chapter includes a presentation of the background of the study, identifies the problem of the study, describes its significance, and offers an overview of the methodology used.

Background

Academic curricula are weighted heavily with mathematics, English, and science to meet basic educational requirements; as a result, personal finance classes take a back seat. Although policymakers make a show of promoting mandatory economic education, fewer than half of U.S. states require even a basic course in economics (Center for Educational Excellence, 2011). However, this number has increased: “Seventeen states now require students to take economics, up from 13 in 1998, and 22 require testing, which is down from 27 in 2002” (Hurst, Education Week, 2012). Economics “is the branch of knowledge concerned with the production, consumption, and transfer of wealth”(“Economics”, 2014), while personalfinancial  management ‘is the use of the principles and techniques of corporate finance in an individual’s money affairs, especially the methods of allocation of financial resources” (“Economics”, 2014). In Survey of the States, the Council for Economic Education (2011) distinguished between the two terms, noting that personal finance classes are required by only seven states,while 49 states actually offer economic classes. Rhode Island is the only state in which classes in economics are not offered (Council for Economic Education, 2011). Pre-college and undergraduate course requirements fall short of requiring basic personal financial management as a part of their core curriculum as well. Inconsistent educational efforts in personal financial management instruction in grades K-12 are evidenced by these numbers.To better understand and prepare our educational systems to address the obvious gap of consistent financial education in our nation, the National Center for Education Statistics could possibly beapproached to gather specific financial education data as they are mandated to gather statistics regarding our public school systems (National Center for Education Statistics [NCES], n.d., para. 1). Data collected by NCES are valuable in that they address high-priority educational needs. Financial literacy statistics reported by NCES can serve as predictors of consumers’ future economic success, which will affect the future economic success of industry in the United States and beyond.

Theoretical Framework

Piaget’s (1981) cognitive and affective development theory served as the framework in this study for analyzing specific educational practices relating to personal financial management. Linking the cognitive and intellectual developmental stages of eighth-grade students with the financial goal-setting techniques taught in Your Financial Plan, was instrumental in defining which goal, short-term, intermediate or long-term, was best understood at an eighth grade level. According to the theory, eighth-grade students are developmentally capable of comprehending goal setting. As applied to this study, the theory holds that the National Endowment for Financial Education (NEFE) curriculum wasappropriate to explain the results of this study. Introducing financial goal setting to eighth-grade students based on their cognitive ability to understand the implications of the goal and measuring the outcome will contribute to the knowledge base of successful personal financial management instructional resources.

Previous research has identified a connection between cognitive development and financial knowledge.  A Wisconsin longitudinal study that involved the collection of data from 1957, 1964, 1975, 1992/1993, and 2003/2005, supports a relationship between greater cognition in early life and greater financial knowledge in later life (Herd, Holden, & Su, 2012).  The questions posed by Herd et al. (2012) were designed to measure personal financial knowledge, which is foundational for financial literacy.  One such question was, “Can you identify your individual assets and their values?”(Herd et al., 2012, p. 429). The authors went on to suggest that the human capital, or economic skill set, formed in early life affects late-life decisions.  Also, the more general the skill acquired (e.g., general math), the stronger the effect in late-life financial knowledge.

Because general economic skills are taught and learned earlier in life, it is suggested that early-life cognition produces late-life financial knowledge.  It can be inferred from the findings of Herd et al. (2012) that financial education should be introduced as a mandatory component of middle school curricula, as opposed to an elective course in high school.  The question remains as towhat financial education curricula should look like at each grade level, and alsowhich financial concepts are best understood at each grade level.or the present study, the question was:What general skills should be taught at the eighth-grade level that will produce a sound personal financial management decision in late life?

Early-life cognition influence.  Linking the cognitive and intellectual developmental stages of the eighth-grade student with the appropriate goals of financial literacy will be instrumental in defining which goal—short-term, intermediate-term, or long-term—is best understood by this particular population.  Piaget (1981) was interested in how adolescents acquire knowledge and how their intellect develops.  Although not a theory of education per se, Piaget’s cognitive and affective development theory provides a framework for analyzing educational practices.  It is clear that children learn different things at different developmental stages. Piaget’s theory is based upon biological maturation and the stages of readiness.  A child’s readiness determines when certain information or concepts should be taught.  According to Piaget’s theory, children should not be taught certain concepts until they have reached the appropriate stage of cognitive and intellectual development (Wadsworth, 2004).

Piaget (1981) theorized four stages of universal intellectual development: sensorimotor (ages 0-2); pre-operational (ages 2-7); concrete (ages 7-11); and formal (ages 11-15).  During the formal operations stage, children reach their greatest level of cognitive and intellectual development and become capable of applying logical reasoning to all classes of problems (Wadsworth, 2004, p. 26).  The middle-school children in the present research studyare at the formal operating stage as described by Piaget. A financial literacy educator’s understanding of intellectual development in the middle school classroom is critical to successfully teaching personal financial management.

Piaget (1981) perceived intellectual development as being both affective and cognitive.  Cognitive and affective behavioral characteristics work together;on its own, cognitive behavior will not produce intellectual development.  Affective behavior, values, feelings, and interests develop alongside cognitive stages.  The middle school children in the present research needed to be motivated and energized to not only understand how changing spending patterns will affect their lifestyle financially, but also to make those changes so they could see the results.  The educator was responsible for teaching the appropriate personal financial management concepts at the appropriate intellectual level.  As part of the HSFPP (NEFE, n.d.), the educator was also responsible for motivating the middle school student to set personal financial goals.  Understanding how to set personal and financial SMART goals that are specific, measurable, achievable, relevant, and time-bound, while also seeing the results are the motivators for the middle school student.

Goal-setting theory.  According to Locke and Latham (2002, 2006), goal setting is the motivation behind success in one’s endeavors.  The authors (2002, 2006) defined a goal as the aim of an action or task that a person consciously desires to achieve or obtain.  Further, Locke (1968) opined that working toward a goal provides a major source of motivation to actually reach the goal–which, in turn, improves performance.  Goal setting involves the conscious process of establishing levels of performance necessary to obtain desirable outcomes.  If individuals recognize that their current performance is not sufficient to achieve their desired goals, they typically become motivated to increase their effort or change their strategy (Locke & Latham, 2006).  It is within the confines of this theory that Doran (1981) introduced SMART goals.  Since then, many organizations have used the acronym to define goal setting with different but synonymous interpretations.

According to the goal-setting theory proposed by Locke (1968), there is a relationship between how difficult and specific a goal is and a person’s performance.  Locke (1968) found that specific and difficult goals led to better task performance than vague or easy goals.  Teaching eighth-grade students how to set goals and measuring the students’understanding of a time-bound goal provided information critical to the development of personal financial management curricula that incorporate the motivation necessary for students to reach their individual personal financial management goals.

Teaching goal setting to eighth-grade students and then measuring the change in their spending patterns based on the goals they set were intended to quantify how spending patterns are influenced by education grounded in the goal-setting theory. Measuring survey outcomes of students in a control group who were not taught how to set SMART financial goals against students who were taught how to set SMART financial goals, may contribute to an effective financial educational methodology that teaches personal financial management skills to middle school students.

Using the theoretical framework of Locke’s (1968) goal-setting theory and Piaget’s (1981) cognitive and affective development theory, methods of teaching financial literacy to school-age children in a single middle school in the southeastern United States were investigated.  The current personal financial management curriculum available in public education must be understood.  Current financial educational curricula written and funded by the federal government and U.S. corporations were evaluated in preparation of this study in order to identify a personal financial education curriculum suitable for this research.  Based on the critical condition of financial literacy in the United States, financial education must be incorporated in every school classroom and at every developmental stage of students.

The proposed research may benefit the financial literacy of the next generation of U.S. students in three ways. First, it may create more awareness of eighth-grade students’ levels of understanding of basic personal financial concepts. Second, it may clarify, based on eighth-grade students’ level of cognitive and intellectual development, which financial concepts can be understood and practiced. Third, the research may contribute to the knowledge base of appropriate financial concepts and appropriate financial goal-setting techniques for educators of personal financial management.

Definition of Financial Literacy

An important first step to becoming financially literate is to understand what being financially literate means.  A gap exists in the literature; there is no approved definition for financial literacy in the world of educational research (Jump$tart, 2008). Therefore, an important second step in this research is to choose a definition that includes core personal financial management concepts to guide the research.  This research will not include all possible financial core concepts necessary to navigate a conclusive personal financial management plan.

Literate means “to acquire knowledge in a certain field”(“Merriam-Webster’s”, n.d.)When“financial” is added to literate, a knowledge of financial concepts is indicated.  Various financial literacy experts define the concept of financial literacy differently.  Fox, Bartholomae, and Lee (2005) asserted that financial literacy refers to one’s knowledge and understanding of financial concepts crucial for making effective financial decisions. Hogarth (2002) suggested financial literacy involved using the knowledge and understanding of financial concepts to implement financial decisions.  In 2008, the President’s Advisory Council on Financial Literacy convened to improve financial literacy and, as a first step, defined financial literacy as the ability to use knowledge and skills to manage financial resources effectively for a lifetime of financial well-being.The U.S. Government Accountability Office (2004)  defines financial literacy as such: “Financial literacy is defined by the federal government as the ability to make informed judgments and to take effective actions regarding the current and future use and management of money”.  The National Council on Economic Education ([NCEE], 2005) offered yet another definition: familiarity with basic economic principles, knowledge about the U.S. economy, and understanding of some key economic terms.  Jump$tartdefines financial literacy as “the ability to use knowledge and skills to manage one’s financial resources effectively for lifetime financial security”(Jump$tart, 2007, p. 37).

Despite the variation of financial literacy definitions, one central theme among them is that the knowledge of personal financial management concepts is the first step.  The second step, which is not defined, involves knowing which personal financial management concepts are necessary to make sound financial decisions.  Twenty-first century financial concepts can include budgeting, saving, spending, stocks, bonds, IRAs, CDs, online banking, and 401Ks (Willis, L. E. 2008; Bernanke, B. S. 2013;Cude, B. J. 2010).  The production of effective educational methods for teaching these financial concepts is of equal importance.  Before an educational path to financial literacy can be paved, society must agree on what makes a person financially literate, while educational systems must also agree on how to create the environment, including the resources, to allow students to become financially literate.

The researcher for this paper chose to begin a journey of testing a current curriculum for the purposes of teaching these financial concepts: budgeting, saving, investing, and spending. Although not inclusive of all necessary financial core concepts, A financially literate young adult will understand the financial concepts of budgeting, saving, investing, and spending, thus  a workable definition.  A contribution to the educational research community towards an accepted definition of financial literacy can be made based on the concepts tested in this research.

Problem Statement

The problem, based on theresearcher’s financial literacy research, indicates U.S. students are often illiterate when it comes to executing basic financial practices (e.g., saving, budgeting, borrowing, and investing). Educational leaders could implement effective financial literacy classes in elementary, middle, and secondary schools as a part of the standard curriculum to enable the United States to remain a strong economic force. To achieve this objective, research into how education affects students’ short-term, intermediate and long-term financial decisions is needed. In addition, an improved level of understanding is needed regarding which methods and designs are best for teaching financial concepts. NanMorrison,the president of the Council for Economic Education (2012) stated, “One need only to look at today’s headlines to see that our mission could not be timelier” (para. 1). An understanding of economics is essential for making informed decisions as consumers, savers, and citizens.

For young people, learning how to make sound financial decisions begins with an understanding of how to construct a short-term, intermediate and long-term financial plan. The results of this quantitative study measuring eighth-grade students’ comprehension of short-term, intermediate and long-term financial goals contribute to a broader base of knowledge from which more definitive financial management educational efforts can be made.

Purpose Statement

Significance of the Study

A study of results from the High School Financial Planning Program was significant for several reasons, one of them being thatmost U.S. public schools do not include personal financial education as core subject matter. Chapter two reports on current literature, which was found by conducting a keyword search using terms such as: economics, personal financial management, financial literacy, and studies of financial educational curriculum available for grades Kindergarten through 12 that teach personal financial management. The research from the keyword search revealed few studies had been conducted on youth financial education programs. Based on the shortage of information available on this subject, there is a gap in the literature.An investigation of financial education in U.S. public schools is warranted.

Fifteen multiple-choice questions created by NEFE to evaluate Unit 1, Your Financial Plan, target the SMART goal methodology taught and used to determine which goals are best understood at an eighth-grade level. These questions posed totwo groups: a test group, in which the members completed the curriculum having been taught goals, and a control group, in which the memberswere engaged in the learning personal financial management skills but were not taught financial goal-setting techniques. Danes’ (2004) survey examined behavioral changes related to spending after implementing financial goal-setting techniques. Although the curriculum is designed for students at the high school level, NEFE supports the idea that this curriculum is written for students at an eighth-grade level and encouraged for students younger than high school age.

The results of the study could significantly influence school systems to choose to implement the NEFE High School Financial Planning Program curriculum. This influence might also generate additional interest and financial resources to allow NEFE to make improvements to the curriculum. Lastly, public officials may take notice of the efficacy of financial literacy interventions and provide much-needed support to public school systems.

Research Question(s) and Hypotheses

RQ1: Do eighth-grade students report making better financial decisions regarding budgeting, saving, investing, and spending 3 months after they are taught financial goal-setting techniques as part of their high school financial planning curriculum?

H1₀: Eighth-grade students will not make better financial decisions after they are taught financial goal-setting techniques, than before they are taught financial goal-setting techiques.

RQ2: Do students who are exposed to the curriculum of high school financial planning report a better understanding of time-bound financial goal setting than students who are not taught the curriculum?

H2₀: Eighth-grade students who are taught financial goal-setting techniques will not report any significant difference in understanding short-term financial goal setting than intermediate- or long-term goal setting.

The independent variable in this research study is the curriculum provided by the NEFE, made available on the public school system website in the state where the study was conducted. The NEFE High School Financial Planning Program (HSFPP) was evaluated in 1999 and again in 2004, 2009 and 2010 to assess its impact on teens’ financial knowledge, behavior, and self-efficacy (Boyce & Danes, 1999; Danes, 2004. High School Financial Planning Program, 2016). Students who completed the program reported  improvements in their financial knowledge, behavior, and confidence immediately after the program. Surveys three months later indicated the positive impact of the HSFPP (Danes &Haberman, 2004).Based on the 2009/2010 evaluation of nearly 4,800 students immediately after completing the HSFPP, before the program, less than half of the students said they understood checking accounts, debit cards, and credit ratings. After the HSFPP, a majority of the students  indicated they understood the importance of credit ratings (62 percent) and how checking accounts (62 percent) and debit cards (64 percent) work. After HSFPP, more than 70 percent of the students said they had improved saving behaviors, while an equal number said they had improved spending behaviors. Before the program, only 40 percent of the students said they felt confident about making financial decisions. That number rose to 66 percent immediately after the program.  Additionally, three out of four students reported sharing what they had learned through the HSFPP with family and/or friends; before the program, only 25 percent said they discussed money with family members.  (High School Financial Planning Program, 2016).  Students who had as little as 10 hours of exposure to the curriculum demonstrated an improvement in financial behavior and increased understanding of money management. Thus the HSFPP curriculum, tested and indicated to be successful previously by Danes (2010), was chosen for the present research.

The dependent variable in this research is the outcome of the 15 multiple-choice questions developed by NEFE (NEFE, n.d.),  as an evaluation of progress at the completion of Unit 1, Your Financial Plan, coupled with Danes’ (2004) survey instrument used to evaluate the curriculum results. Based on the results of the 2009/2010 Danes survey stated above, it is expected that students who are exposed to the NEFE curriculum will show improved spending patterns, as opposed to middle school students who are not exposed to the curriculum and will have a better understanding of what a short-term, intermediate-term, or long-term goal is as a result of being taught financial goal-setting techniques. Thereason this program was used as the research model for this study was that it was a financial planning curriculum that was approved by the state in which the selected school was located, for use in teaching financial concepts.

Considering that few research studies have been conducted to identify the behavioral outcomes of a personal financial management program coupled with the statistical evidence of the state of financial literacy among America’s youth, this investigation is clearly warranted. It will add to a body of knowledge about youth financial education and how programs can be conducted to increase the likelihood of desired behavioral outcomes.A survey of past program participants would focus on behavioral changes rather than just intended changes. Effective evaluation to identify changes in intended versus actual behavior changes would capture more specific indicators of whether or not participating in the program had any lasting effects.

 

CHAPTER TWO: REVIEW OF THE LITERATURE

Introduction

A comprehensive review of the literature regarding personal financial management educational opportunities for students in grades K-12 was conducted to assist the researcher in not only choosing an effective curriculum to incorporate into the research, but also to know the current availability of possible alternatives. As teachers are expected to advance students’financial literacy, effective educational opportunities must be available and affordable.  Few would argue the financial world is complex, and many are ill-equipped to maneuver the global marketplace. A generation ago, one needed to know little more than how to balance a checking and savings account and how to write a check; that was the extent of the financial world in which most individuals lived. In the 21st century, the financial marketplace is exponentially broader. As Lusardi, Michaud, and Mitchell (2013) explained,

Just as it was not possible to live in an industrialized society without print literacy-the ability to read and write-so it is not possible to live in today’s world without being financially literate. To fully participate in society today, financial literacy is critical. (Lusardi et al, 2013, p. 2)

Consequently, a two-day symposium hosted by the National Research Symposium on Financial Literacy and Education was conducted in 2008 to answer the call to increase measures to improve financial literacy education. Twenty-nine scholars gathered at the symposium to discuss measures to improve financial literacy education. Their focus was to identify educational research priorities in relation to financial literacy. Ten educational research priorities were identified to guide research for the next decade (FLEC, 2008). The first two priorities noted were answers to two questions: “What are the core principles of personal finance that every consumer needs to know, and what evidence exists that current standards are effective in helping people reach their financial goals?” (FLEC, 2008, p.1).  These two questions were asked to guide future educational opportunities and provide a foundation for educational resources that teach personal financial management. The FLEC symposium focus, specifically the two research priorties stated above, guide the research for this study.  The research presented here will identify core principles for this research and suggest effective current standards in financial goal-setting techniques.

One way to examine core financial principles of financial literacy is by looking at statistics related to budgeting, saving, investing, and spending in America. A report released by the Pew Research Center (Taylor, Funk, & Clark, 2010) offered troublesome statistics:

Nearly two-thirds (63%) of Americans acknowledge they don’t save enough, and more than a third say they often (11%) or sometimes (25%) spend more than they can afford. More than one-in-three (36%) Americans say that they have at some point in their lives felt their financial situation was out of control and only 14% of American adults mentioned their company’s 401K plan when asked about ways they save. (Taylor et al., 2010, p. 2)

Data offered by other researchers is equally grim. More than 40% of American households have less than $1,000 in liquid, non-retirement savings accounts according to the U.S. Census Bureau data (as cited in Gerhardt, 2014), leaving them vulnerable financially. The average credit card debt of the U.S. consumer household in 2013 is $15,325; the average mortgage debt is $147,924; and the average student loan debt is $32,041 (Gerhardt, 2014). When a financial literacy crisis is met by a failing economy, the situation is critical. The global crisis is represented in many different forms in the United States, including a soaring national deficit, failing banks, and government bail-outs. Perhaps the solution is to provide more relevant personal financial management in the classroom and require students to complete the curriculum.

The HSFPP, created by NEFE, is a turnkey financial literacy program specifically focused on basic personal finance skills that are relevant to the lives of preteens, teens, and young adults (NEFE, n.d.). Developed in the 1980s, the HSFPP is offered free of charge to middle school teachers as a financial literacy resource. The curriculum focuses on six topics: planning, borrowing, earning capability, investing, financial services, and insurance. Teachers can download recorded lessons from the NEFE website, and live training sessions are offered throughout the country, thus adding to the external validity of this curriculum. Upon completion of the program, students are expected to have a basic understanding of budgeting, saving, investing, and spending.

The financial literacy program HSFPP provided major contributions, specifically in chapter one, related to SMART goal-setting techniques. Doran (1981) was credited with developing the SMART goal concept as a result of this statement that appeared in a November 1981 issue of Management Review in an article titled “There’s a S.M.A.R.T. way to write management’s goals and objectives” (para. 3).  The acronym has become and still remains a popular method for goal setting in many disciplines. SMART is a mnemonic tool for defining a successful way to set goals.  The S stands for something specific and clearly defined.  The M stands for measurable, something that will produce tangible evidence of having successfully reached the goal.  The A stands for something achievable rather than impossible.  The R stands for relevant to the goal setter’s world.  The T stands for time-bound goal.  This study investigated the perceived benefits of learning how to set sound financial goals and how this knowledge translates to the future spending behaviors of eighth-grade students.

Sharon Danes, a professor and family economist in the College of Education and Human Development at the University of Minnesota, evaluated the HSFPP in 2010 (NEFE, n.d.). The Danes (2009) survey was given once to all students who participated in the teacher-led curriculum three months after the curriculum was taught to measure their understanding of financial goal-setting techniques.  The survey consisted of six questions regarding their spending patterns before participating in chapter one, your financial plan, of the NEFE curriculum. The same questions were asked a second time to measure the spending patterns of the students three months after participating in the NEFE curriculum. One such question was this: Before making a purchase, I compare prices. The student records, using a Likert scale, whether or not they compared prices before taking Unit One, Your Financial Plan. The same question is asked the second time, whether or not they compared prices more or less three months after taking Unit One, Your Financial Plan.(Danes, 2010).

After students participated in the teacher-led curriculum and the exercises associated and provided by the curriculum, a survey was administered to quantitatively measure the effects of the curriculum. The surveyincluded15 multiple-choice questions at the end of chapter one,in addition to Danes’ survey questions, which were specifically designed to test the effectiveness of HSFPP. The survey was chosen due to the fact that it was the best instrument currently available to test budgeting, saving, investing, and spending in young adults. Two other behavioral research studies have either used the Danes survey created to evaluate High School Financial Planning Program. One such study was:  “A Follow-up Study of Ohio State University Extension’s Youth Financial Literacy Program Real Money, Real World: Behavior Changes of Program Participants” (Bateson, 2009). The survey instrument used in the Bateson (2009) thesis was an adaptation of the Danes 1999 survey (p. 90). Another thesis, “Examining the Effectiveness of Alabama Cooperative Extension System’s Youth Financial Education Program: Behavioral Changes of Program Participants”, partially modified the Danes financial literacy questionnaire in 2014 as the survey instrument in their research. (Jones, 2014, p.2).

To measure the effectiveness of Unit One, Your Financial Plan, the same fifteen questions from chapter one of the NEFE curriculum were used to measure whether or not the middle school student was better able to recognize a short-term, intermediate-term, or long-term goal. The data was quantitatively analyzed here as to which goal is least understood. One such question was this: Juan plans to save $4,800 to help pay for college. He expects to pay this amount for tuition and books in two years. How long will he need to plan to achieve his goal? The student is then asked to identify whether or not this goal is short-term, intermediate-term, or long-term. This cognitive process of understanding a short-term, intermediate, or long-term goal in the eighth grade allows for focused educational efforts in developing resources and experiential learning exercises to guide the students in setting appropriate time-bound goals, whether short-term, intermediate, or long-term.

A thorough review of the literature indicates that these instruments would be most effective in measuring budgeting, saving, investing, and spending in young adults. Although the effectiveness of the HSFPP has been demonstrated in its longevity, no research has yet addressed middle school students. Following quantification of the effectiveness of the HSFPP with eighth-grade students, suggestions can be made to the financial literacy research community regarding a necessary educational focus of personal financial management in this population of students as well.  Thus, the primary purpose of this research is to contribute information to financial literacy research committees that will help to identify the core principles of personal finance that every consumer needs to know.

Education and Financial Literacy

Although researchers, government organizations, and U.S. corporations have advocated for financial literacy, there should not be any federal requirement for public school systems to provide personal financial education courses. Instead, these decisions should be made by local and state education agencies. Schools are failing to provide children with a sound understanding of personal finances; therefore, we can expect them to make financial misjudgments and errors in adulthood (Danes, 1994). With the increased support given to public school systems by the federal government and U.S. corporations since the 1990s, one might reasonably expect students to be more financially literate, but in a series of financial literacy tests dating back to 1997, Jump$tart found that for young people, their understanding of personal finance has remained consistently unremarkable. Although financial literacy efforts have increased, financial literacy is still not taught nationally as part of elementary, middle, or high school curricula. Financial education curricula, when offered, vary from state to state, perhaps because there has been no impetus for an organized effort to standardize curricula. The fact that the Federal Government does not standardize financial literacy curricula provides the hope that states could recommend effective curricula to teach financial literacy and each local school district be allowed to make a curriculum choice. The data collected in this research suggests that using HSFPP to teach

personal financial management goal-setting techniqueswork very well in teaching financial literacy to the middle school student, thus supporting the curriculum choice for this research.

Habits related to personal financial management develop at a young age, usually from parents or caregivers, and are usually carried into adulthood. For adults, the lack of prior financial education is often demonstrated through bankruptcy, high consumer debt levels, low savings rates, and other negative outcomes resulting from poor financial management. When people cannot manage their finances, it becomes a problem not just for them, but also for society. Anna Lusardi, director of the Global Center for Financial Literacy, was quoted as saying,

Studies show that Americans who are not financially literate are less likely to participate in financial markets or to invest wisely. They are less likely to save and plan for the future. At the same time, they are more likely to rely on high-cost methods of borrowing. This is a serious problem. Remedying it is difficult, but adding financial literacy to the curriculum in schools would be a good start. (Kadlec, 2013, para. 9)

Although the concept of financial education is not new, the resources to nurture this education exist in a variety of forms. Financial literature resources and educational programs for teens are readily available (Hogarth, 2002), and a variety of programs are offered by schools, colleges, banks, organizations, community groups, employers, and others.

Elementary school. Very few elementary school economic curricula exist (Ballard, 2006; Day, 1996; Godfrey, 2006; Hiatt-Michael, 2008; Indiana State Department of Education, 2006; Jorgensen &Savla, 2010; Joyce, 2009). According to one estimation, children of 12 years of age and younger, or elementary school children, influenced parental spending by more than $600 billion in 2000 (Suiter&Meszaros, 2005). Advertising influences younger people to continuously buy products. As soon as children begin to talk, “want”is large part of their vocabulary. Therefore, “improving basic financial education at the elementary and secondary school level is essential to providing and preventing younger people from making poor financial decisions that can take years to overcome”(Suiter&Meszaros, 2005, p. 95). The longer the wait, the more time it will take to correct financial practices.

An organization committed to initiating financial education at an early age is Jump$tart. Jump$tart is a coalition of 180 national organizations that share an interest in advancing financial literacy among students in pre-Kindergarten through college by providing advocacy, research, standards and educational resources. Founded in late 1995 and based on an idea credited to William E. Odom, who was then chairman and CEO of the Ford Motor Credit Corporation, Jump$tart wrote and published the National Standards for K-12. Originally written in 1996, the standards were revised in 2001 and again in 2006 (Jump$tart, 2007). This history is presented by Jump$tart as follows:

The K–12 standards trace a path to a minimal level of competency upon completion of high school. They describe what personal finance instruction should enable students to know and do. The standards fall into six major categories of personal finance—Financial Responsibility and Decision Making; Income and Careers; Planning and Money Management; Credit and Debt; Risk Management and Insurance; and Saving and Investing. Each category focuses on an overall competency derived from the Jump$tart Coalition’s definition of financial literacy. (Jump$tart, 2007, p. 3)

Here, particular core financial concepts are identified to trace a minimal level of financial competency, although these are not clearly defined for the educator. It is important for the educator to have effective resources available that teach these concepts. Understanding each concept, for both student and educator, requires much effort be put into developing effective teaching resources.

Money Savvy U (Money Savvy Generation, n.d.) classroom presentation material generates interesting classroom discussions. Money Savvy U is an example of a curriculum with an elementary school focus. Money Savvy is a program that was launched in 1999. Money Savvy U is a curriculum written for students from Kindergarten to 10th grade and serves as the perfect complement to any economics, consumer education, business education, or personal finance class. This curriculum satisfies math, reading, and economics standards in all 50 states for grades 1-5. It is also designed to engage young teens in grades 6-10. Each of the five scripted lessons requires approximately 20 to 40 minutes of classroom time, including discussions. Instructor materials consists of a scripted, animated Microsoft®PowerPoint®presentation on CD-ROM. Students learn to build sound money management habits by practicing with the Cash Cache Personal Finance Organizer. The disk also contains the “Do You Think Like A Millionaire Game” designed to teach asset-building skills through a fun and interactive team game format. (Money Savvy Generation, n.d.).

Finally, the Children’s Financial Network (CFN) was founded by Godfrey in 1986, after she completed a successful career in financial planning. CFN offers a “Common Cents Series”curriculum for elementary schools that encompasses materials for grades K-3 and is currently being used in more than 5,000 classrooms in 48 states (CFN, n.d., para 3). The Common Cents Series was created to be integrated into existing math or social studies curricula.

Middle school.A review of the available curricula for teaching financial education to middle school students was foundational for this project as eighth-grade students were the research subjects. According to Piaget’s cognitive and affective developmental theory (1981), middle school students are in the formal operational stage of intellectual and cognitive development, and are thus capable of logical reasoning. The decision to teach goal setting as part of this research project was grounded in this theory. Personal financial management teaching resources to promote financial literacy are much more available at this level than at younger children’s levels.

Many universities also recognize the importance of supporting the financial literacy of the middle school student. Leaders of Concordia University in Portland, Oregon, understand the importance of financial literacy for the middle school student. They produce a website and online courses for teachers, the focus of which is the importance of financial education in the public school system. According to Concordia (2013), the middle school student may not understand his or her parents’ income to debt ratio, but he or she can see and experience the change in lifestyle. Therefore, the child can logically reason the necessity of personal financial management. Concordia (2013) proposes why middle school students should be taught financial literacy.

The Internet makes buying (and charging for) music, games, books and other goods so easy that consumers are getting into financial trouble at an earlier age. If children learn principles like “nothing is free” and “saving for the future is wise,” then they begin to develop stronger critical-thinking skills related to money and finance. Some estimates suggest that 20% of the people filing for bankruptcy in the United States are under the age of 25. Credit for higher education is easy to obtain and students need to learn to examine the effects of interest on student loans before they make decisions about financing their college years. There is a disparity between what children in middle- and upper income homes learn about money and what children on the lower end of the socioeconomic ladder are exposed to while at home (Concordia, 2013).

While this researcher chose not to review a conclusive list of available middle school curricula, the five curricula highlighted in this section were chosen based on their popularity. Because personal financial management is not required in middle school, the researcher chose these five because they exemplify that personal finance and economic content can be taught in a variety of ways and incorporated within the approved and proposed curriculum.

The first approach highlighted in this research to teaching personal financial management in middle school involves uniting different subjects to teach one concept. In this example, language arts and math curricula are combined to teach personal financial management. Seventh graders at a middle-school in Indianapolis practiced their math skills by learning to live on a budget. The teacher reported that the children discovered how difficult it is to make ends meet (“Bringing Home Budgeting Realities,” 2004). The project tied together math skills and life skills taught in a language arts curriculum. The middle school children chose a career based on their skill set, were given an account to deposit their make-believe paycheck, and were asked to purchase a home and manage all the responsibilities that come with the home. Many of the children overdrew their bank accounts regularly and were amazed that it was so difficult to pay for everything they needed, much less everything they wanted.

Another approach, as reported in Scholastic News (Marino, 2009), highlighted another similar program that creatively uses the time children spend waiting to be picked up after school. Middle school children living in Brooklyn, New York, participated in an after-school program concerning money management. Similar to the program documented in “Bringing Home Budgeting Realities”(2004), this program focused on using interactive activities to teach the children basic principles of making wise financial choices by joining together curricula. In this program, the class focused on how to spend money wisely by introducing goal setting (FLEC, 2008).Goal setting is critical for achieving desired results in any life situation; thus, the researcher chose to highlight this curriculum for its effectiveness in teaching personal financial management. The students are taught to save money for specific items, all the while gaining interest on their money. The students are taught to access any purchase by asking questions of want or need. The students are also taught to give and to recognize the intrinsic rewards that come from giving.

A traditional approach to teaching financial concepts that is well-written and organized is Money Math. Money Math: Lessons for Life (U.S. Department of the Treasury, Bureau of the Fiscal Service, 2008) is a “four-lesson curriculum supplement for middle school math classes, teaching grade 7-9 math concepts using real-life examples from personal finance” (para. 1). The teacher’s guide includes lesson plans, activity pages that can be copied and distributed to students, and teaching tips. The curriculum is attractive from a budgeting standpoint as the workbook is available to teachers at no cost.Money Math: Lessons for Life was developed by CEE in accordance with national school mathematics standards (U.S. Department of the Treasury, Bureau of the Fiscal Service, 2008, para. 2).The lessons have received positive reviews by teachers and parents. A k-8 educational technology coordinator from Maryland states, “I like the breakdown of specific skills that correlate with each grade level. I also like the illustations along with the answers to each question.”  A parent of an eighth-grader from California states, “This program takes the frustration out of math because it allows the student to practice at his or her own pace and stay focused” (Money Math, 2015).Teachers need not be experts in personal finance to use Money Math in the classroom; both questions and answers are provided in the book (U.S. Department of the Treasury, Bureau of the Fiscal Service, 2008).

Another approach that has proven effective in teaching certain skills is gaming and technology. The BizKid$ concept is an example of a curriculum that can be used with middle school students and is primarily a technological game. Each personal financial literacy topic in the curriculum has an accompanying video with the lesson plan. (BizKid$ 2015).The lesson plans are written to last 45-60 minutes and the videos range from 30 to 60 minutes. Although the lesson plans are available online at no charge, there is a cost incurred for videos: $49.95 each or $3,100 for the set of 66 videos(BizKid$ 2015). The BizKid$ curricula are developmentally age-appropriate, popular, contemporary, and primarily targeted to middle and high school students (BizKid$ 2015).  BizKid$ represents a personal financial management resource that kids can use independent of a teacher and because it is considered gaming, could be an effective motivator for teaching personal financial management.

Lastly, select students learn when challenged independently. A contemporary curriculum, Gen I Revolution (CEE, n.d., para. 1) allows a student to search for the methods that work while on completing a mission of sorts. The curriculum consists of 15 interactive missions students complete to assist them in learning personal financial concepts. As a part of the mission, the student becomes a character who is facing a particular financial crisis. The student uses strategies to complete the mission and survive the crisis. Each mission takes approximately 30 minutes to complete. Strategizing and competing are effective approaches when teaching personal financial management concepts.

When choosing among current financial educational programs available at the middle school level, school administrators must take into account the effectiveness of each program. In a national sample of financial education providers, Lyons, Palmer, Jayaratne, and Scherpf (2006) found that more than 60% of educators conduct a program evaluation “most of the time”and 90% conduct an evaluation “some of the time.”Many other programs are even less clearly evaluated and, of those programs that are evaluated, many programs do not conduct surveys that try to match knowledge with behavior (Hogarth, 2002). The NEFE (n.d.) HSFPP curriculum used in the present study was evaluated in 1998 and again in 2004 to assess its impact on teens’financial knowledge, behavior, and self-efficacy (Danes, 2004; Danes et al., 1999). The inconsistent evaluation of financial literacy programs for students suggests the need for more research at all grade levels.

High school. Although more studies of financial knowledge have been reported at the secondary level than at the primary level, studies have not closely examined the secondary school experience, such as how general academic performance and particular kinds of general academic coursework may shape financial skills across the life course (Barron & Staten, 2011; Bell, Gorin, & Hogarth, 2009; Cole &Shastry, 2009; Lusardi& Mitchell, 2008; Way &Ang, 2010). With respect to the limitations of evaluation measures for the middle school and high school student in financial knowledge, it is important to review what does exist in the literature for the high school student.

The National Assessment of Educational Progress administered anunprecedented test accessing the economic literacy of high school students (Tomsho, 2009). The test was given to 11,500 students at 590 public and private schools. On a point scale of 0–300, 42% of students scored in the range of 160 and 3% scored above 200. DarvinWinick, chairman of the National Assessment of Education Progress, explained that while there was clear room for improvement, the results were not discouraging (Tomsho, 2009).

Another such study was conducted to address concerns for the events of September 11, 2001, and the effects of those events on high school economics. “The study, Open and Operating: The Federal Reserve Responds to September 11, is a video developed by the Federal Reserve Bank of San Francisco to inform the public about the role the central bank can play in responding to a crisis”(Lopus& Hoff, 2009a, p. 38). The video was the result of a curriculum package developed to improve the economic knowledge of 1,291 high school students and 24 economic high school teachers. Recruiting for an unbiased sample was accomplished by inviting students from 1,000 high schools to participate in the research. As California is home to an ethnically diverse population, the random sample was balanced. The research design included an evaluation of pretest and posttest scores based on students’answers to multiple-choice and essay questions. The findings suggested that using a video curriculum to teach economics instead of more traditional methods can help improve student achievement in economics (Lopus& Hoff, 2009b).  Lopus and Hoff (2009b) stated white male students scored higher on the multiple-choice questions than other subgroups, while female students and Asian students outperformed the others on essay-type activities.

Another study that involved examining the effectiveness of financial literacy curricula was sponsored by the NCEE, which supported the Templeton Project in 2008. The Templeton Project was a study of 53 teachers and 789 students who participated in an economic ethics class. The assessment measured a plethorasubjects and attitudes towards those subjects such as: negative and positive statements and difference between self-interest and greed. The final lesson was to define economic justice. There were huge variations in the results, suggesting that factors such as age, number of economics classes already taken, higher educational aspirations, and individual value systems were significant. The research was intended to disabuse the notion that teaching economic ethics in high school is too late for students to make changes to their way of thinking regarding how they spend their money.

Next, a study was implemented in three high schools in the same school system to assess whether a personal financial education class increased personal financial knowledge 5 years after the class was completed. The findings indicated that those who took the course were no more financially literate than those who did not take the course (Cude, 2010). Are the findings significant enough to suggest that financial education is an ineffective approach to becoming financially literate? Bernheim, Garrett, and Maki (2001) disagreed with the idea that personal financial management taught in high school was ineffective and suggested that knowledge gained in high school personal financial classes yields results much later, when students have developed more adult financial behavior patterns; thus, the results suggest a need for more longitudinal studies in the educational research community relative to financial literacy. For instance, individuals who took economics courses in high school were less likely to be unbanked after high school (Grimes, Rogers, & Smith, 2010).

A study of 361 undergraduate students conducted at a public university in California involved surveys of personal financial knowledge by business majors and non-business majors (Chinen& Endo, 2012). Those students who had taken economics classes in high school were more able to correctly answer questions about personal finances than those who had not taken economics classes. The findings led Chinen and Endo (2012) to conclude there was a positive relationship between students who took economics classes in high school and students who answered the questions correctly. Variables were introduced into the research such as: age, gender, numeric vs. less-numeric nature of academic disiplines, education level of parents and formal financial education in high school.  The only positive relationship was found among students who participated in a basic structure of finance and economy as part of their requirement in high school.

Some financial literacy programs have received higher marks than others. For example, Cude (2010) remarked, “Jump$tart surveys have shown consistently that high school students who play a stock market game are significantly more financially literate than those who do not”(p. 273). Interactive educational methods have been shown to be effective in many educational disciplines. Educational theorist EdwardKolb(1984) reported “learning is the process whereby knowledge is created through the transformation of experience”(p. 38). Kolb proposes that learning is cyclical and progresses through four stages. First, one must first have a concrete experience or “do.”Second, one must “observe”and reflect upon the findings of the experience. Third, one must form abstract concepts from those reflections. Finally, one must test the concepts in active experimentation. Interactive teaching theories and methods such as the stock market game suggest that interactive methods of teaching personal financial practices are more effective than non-interactive methods.

Although more recent studies show early financial education is effective in producitng more financial literate young adults, earlier studies prior to 2007 seem to indicate the contrary.Lopus and Maxwell (1994) pointed out that high school economics classes do not prepare students for college economics classes. The researchers reached this conclusion after obtaining pretest results from those entering college-level economics classes, and also from a sample of college students in 13 economics classes. A similar study by Mallik and Basu (2007) indicated that not only does general mathematics have a negative impact on high-school economics, but it also has a limited role in success in economics at the university level. These findings suggest a large gap in the progression of learning sound economic and financial practices in education when one is young, and successful personal financial management when one is an adult.

College and beyond. Although business has long been a popular major at the college level, indications are that enrollment in this field is increasing. Damast (2009) noted, “In the academic year 2006-07, the largest number of bachelor’s degrees conferred were in business”(p. 5). Enrollment in business programs increased by 7% from 2008 to 2009, according to the president of the Association to Advance Collegiate Schools of Business, who stated, “Any time the economy looks difficult, undergraduates will look towards a degree that they can more quickly apply to a job, and students see business as the major with the greatest likelihood of getting one”(Fernandes, as cited in Damast, 2009, p. 6). Business majors studying financial management skills and using them in practice are currently the only avenues for college-age students to learn personal financial literacy. In fact, the research suggests that college-level economics classes improve adult investment literacy (Peng, Bartholomae, Fox, &Cravener, 2007).

Exacerbating the problem of future financial literacy, college graduates often begin their careers burdened by considerable student loan debt. “The total student debt load hit $1 trillion in April 2012”(Stuart, 2012, para 1). On a more personal level, Ellis (2013) noted, “Between ballooning student loans, credit cards and money owed to family members, 2013 college graduates are facing an average $35,200 in college-related debt, a Fidelity survey of 750 college graduates shows”(para.1). College students seem to ignore the problem of debt; a survey of 800 college students at Iowa State University study revealed 40% of the surveyed students underestimated how much they owed and 13% were unaware they had debt (Stuart, 2012). In response to the Iowa State University study, 10 of the top universities in the United States announced plans to annually update students on their loan balances and what their average monthly payment would be after graduation. Leaders of those 10 universities heeded the message of that study and took the opportunity to capitalize on a teachable moment for financial literacy.

College-age students need strategies to manage their personal finances after graduation. The issue lies with when and whether they choose to investigate financial options or continue to ignore their financial predicament. Kezar and Yang (2010) proposed that a teachable moment in financial education occurs when a person is about to make a financial decision. Colleges are beginning to educate college students about loan processes and their consequences to promote financial literacy among adults entering the workforce.

Paul Auslander, president of the Financial Planning Association of America, proposes the optimal time to learn personal financial management skills may be upon graduation from college. Auslander(as cited in Nelson, 2012) stated that financial literacy may be the most difficult and yet most solvable problem faced by society. According to Auslander, personal financial management is naturally taught when a financial planner works with someone. The educational effectiveness of a financial planner is limited to clients who can afford financial planners, which eliminates individuals of low socioeconomic groups. Even if free financial planning is offered to individuals in low socioeconomic groups, members of these groups cannot be forced to use the services, thus excluding a large portion of society from the benefits of financial literacy.

Another example of an adult personal financial management opportunity was made at the University of Wisconsin in 2012, when J.M. Collins, after studying common themes in the research circles of financial literacy experts, proposed that financial advice might be as important as financial education toward the development of a financially capable individual. Based on studies by Engelmann, Capra, Noussair, and Berns (2009), Collins (2012) proposed that financial advice improves people’s cognition enough to substitute for their lack of financial knowledge, thus helping them to make better personal financial management decisions.MRI studies of the brains of individuals making financial decisions revealed that when individuals received financial advice while making decisions, the brain was much less taxed (Engelmann et al., 2009), thus contributing to greater financial capability.

Government and Financial Literacy

Government has historically played a large role in promoting financial education in schools. A report prepared by the President’s Advisory Council on Financial Literacy (2008) included the recommendation that individual states and the federal government mandate financial education from Kindergarten to Grade 12, and additionally require college students to take a financial literacy course before taking out student loans. One of several bills in Congress addressing the issue was proposed to devote $250 million per year to financial education, with the money split between K-12 schools and colleges. The question is, even if personal financial management education is supported by the federal government, will students make financially literate personal financial decisions? Steverman (2009) contended that,

Even if you use regulations to protect people from foolish financial choices, even if you teach them the intricacies of taking out a mortgage or setting up a 401(k), the U.S.’s movement from a nation of spenders to a nation of savers is by no means assured. Those pushing for financial literacy know they face a long road ahead. (Steverman, 2009, p. 54)

The U.S. government developed a national strategy to promote financial literacy and education by establishing the FLEC through the passage of the Fair and Accurate Credit Transactions (FACT) Act of 2003. FLEC is composed of 22 federal entities and is chaired by the Treasury Department. A primary responsibility of FLEC (2010) is to develop a national strategy to promote financial literacy and education. A direction of the FLEC is to establish priorities for financial literacy research. The first priorities were developed at the 2008 national symposium, and the top two priorities led to the present study: “What are the core principles of personal finance that every consumer needs to know, and what evidence exists that current standards are effective in helping people reach their financial goals?”(FLEC, 2008, p. 1.). On September 20, 2011, a FLEC research and evaluation working group was established to update the research priorities from the 2008 Symposium. The group developed a set of nine issues to be addressed by the following research priorities:

• Evaluate the delivery of financial education for youth and adults in order to identify effective approaches, delivery channels, and other factors (such as the interaction of knowledge, products, and behaviors) that enhance effectiveness.
• Identify optimal combinations of financial information, advice, regulation, disclosure, and delivery mechanisms, including default options, and their impact on starting and maintaining positive financial habits.
• Employ longitudinal data to evaluate the effectiveness of core competencies on behavior and financial well-being over time.
• Identify, evaluate, and build consensus on “key metrics”for financial education/capability, including measures of knowledge, behaviors, and well-being.
• Identify and evaluate the relationship between financial education and access to and design of high quality financial products.
• Assess the role of business cycles and the economic and financial contexts in individuals’financial decision making.
• Ascertain how risk and uncertainty, including economic and other shocks (such as natural disasters), alter risk exposure and risk management choices both at the consumer and community levels.
• Identify opportunities and roles for local, state, and federal governments as scalable platforms for financial capability.
• Identify and evaluate potential synergies between educational programs targeting financial capability and those targeting physical and mental health (FLEC, 2012).

In addition to developing the nine research priority issues in 2012, FLEC also developed a strategy for moving families toward financial well-being, financial stability, and financial security (FLEC, 2012, p. 7). Four goals were established to further the initiative.

• Increase the awareness of and access to effective financial education;
• determine and integrate core financial competencies;
• improve financial education infrastructure; and
• identify, enhance, and share effective practices (FLEC, 2011).

These goals were acknowledged by FLEC to not be conclusive, but the expectation in developing them was that offering these goals would encourage individuals throughout the nation to develop their own goals to accomplish the FLEC vision.

Lastly, another example of a contribution to U.S. students’financial literacy by a government organization was made by the Federal Deposit Insurance Corporation ([FDIC], 2013) in the form of Money Smart for Young Adults.This program consists of eight lessons that include a scripted leader’s guide, a participant guide, and overhead slides. Money Smart is free, and educationally aligned with the financial literacy of all 50 states. The modules include Bank on it, Check it out, Pay Yourself First, Setting Financial Goals, Borrowing Basics, Charge it Right, Paying for College and Cars, and A Roof Over Your Head. The goal behind providing these modules is to equip students ages 12-20 with the skills to make sound financial decisions and create positive relationships with financial institutions (FDIC, 2013).

Corporate America and Financial Literacy

Corporate leaders from America Center for Credit Education, Visa, Washington State Credit Unions, and The National Financial Educators Council have joined educators and the government to offer experiential personal financial management learning opportunities that allow students to test their understanding and explore their development of ideas through interaction with the environment (Galligan, 1995; Gregory, 2002; Harris, Denise, & Thomas, 1989; Kolb, 1984). One such opportunity is the Bank-at-School concept used by several organizations, including Save for America, Illinois schools (Illinois State Treasurer, n.d.), and Credit When Credit is Due (American Center for Credit Education, n.d.). Johnson and Sherraden (2007) proposed that interactive learning methods, such as partnerships with educational systems and financial institutions, allow students to develop financial capability. Financial capability is defined as the ability to act on financial knowledge learned (Practical Skills for Life, 2013).

Another tool funded by corporate America is the Practical Money Skills for Life curriculum written for middle school students (https://www.practicalmoneyskills.com). It also provides a financial educational curriculum for school age children at all levels. It is sponsored by Visa and the resources are free online. These resources include lesson plans, videos, games, amortization calculators, blogs, Microsoft®PowerPoint®presentations, and quick study guides. The comprehensive collection of lessons offered by Practical Money Skills covers a variety of topics, such as setting goals, budgeting and purchase planning, protecting credit and identity, savings, investing, and financial planning. Lesson plans are designed to engage students with real-world connections in scenarios they will find relevant to their own lives. Learning activities encourage inquiry and augment understanding through problem solving, research, discussion, and collaborative activities.

Washington State Employees Credit Union ([WSECU] n.d.) is another corporation that is concerned about the financial literacy of school age students and how this will affect future consumers. A free financial literacy curriculum is offered online. The website contains four teacher training videos and four lesson plans, which cover budgeting, savings/investing, spending, and managing your money. Workbooks for the student can also be downloaded from the website free of charge (WSECU, n.d.).

The National Financial Educators Council ([NFEC] n.d.) , is a for-profit group whose members are interested in the financial literacy of U.S. students. NFEC provides financial literacy solutions not just to educators, but also to businesses and families through its website. NFEC offers many resources ranging from curriculum packages to financial literacy campaigns. Financial professionals, educators, and financial experts collaborated to create the training materials and campaign resources.

Financial Literacy and Behavioral Influence

In a qualitative review of research conducted to refine the notion of transformative expectations involving credit, Richins (2011) wrote,

The President’s Advisory Council developed a list of the 12 skills and concept areas that should be included in a comprehensive financial literacy program, including topics such as understanding the capital market system, household cash flow, household emergency funds, the fundamentals of credit granting, financial risk, and identity theft. Yet even these determinedly comprehensive recommendations fail to address one of the most important elements of financial literacy: how consumers can manage their natural desires for more goods than they can afford and how to resist the temptation to buy something now rather than save for later. (Richins, 2011, p. 153)

The psychological skill to make the right buying decision needs to be somehow incorporated into financial literacy training. Richins (2011) called this incorporation of skilled training a financial lifestyle.

Consumer spending and savings behaviors are changing, but not for the good. Howlett, Kees, and Kemp (2008) expressed the situation as follows: “For the first time since the Great Depression, overall consumer savings rates are negative”(p.224). In comparison, the average savings rate during the mid-1900s was +4.6% (Crutsinger, 2007). With members of the baby-boom generation approaching retirement, these numbers are troubling. Who will pay the bills? With the uncertainty of Social Security payouts and inevitable inflation, what is the reason for this behavior? Sharp (2007) expressed the concern as follows: “Despite the benefits of saving for the future, a significant percentage of people choose not to adequately save for long-term needs”( p. 34). Why people make the choice to participate in activity that produces short-term pleasure rather than long-term benefits, such as retirement, is of substantial research interest (Howlett et al., 2008). Howlett et al. (2008) further state that, “One explanation for this pattern of behavior is based on the assertion that some people have a lower propensity for considering the future outcomes of their current behaviors than others”(p. 35).

Considering Future Consequences (CFC) is an instrumentestablished and measured by Joireman, Strathman, and Balliet (2006).  Considering Future Consequences involves the conceptualization of future orientation; the concept that people who measure high on the CFC scale are more likely to participate in retirement savings plans, thereby demonstrating that future-oriented individuals are more financially literate. This concept is significant in explaining a connection of behavior and financial literacy. However, results have shown that in the absence of financial knowledge of retirement strategies, high CFC has little influence on the likelihood of contributing to a retirement plan (Howlett et al., 2008).

Spending behaviors are centric when measuring financial literacy. Consumer marketing is well aware of what ignites the appetites of consumers; spending disciplines are tested consistently. Americans work harder and longer to fulfill these appetites, not to save money (Richins, 2011). Richins (2011) proposed that people buy in hopes of transforming their life. This transformation expectation, as Richins (2011) called it, is underdeveloped and less empirical than other notions; thus, more research is required. The premise behind this behavioral study speaks volumes towards finding a suitable definition for financial literacy. It exemplifies the behavioral aspect present when an individual makes all his or her financial decisions. This behavioral aspect of need and desire is more apparent than the memory of financial concepts taught in any forum.

Contrary to the majority of random national surveys that quantitatively reported low financial literacy among low-income residents, Buckland (2010) reported that many low-income Canadian residents evidenced financial literacy in that many learned to cope with strict budgets, used diversified activities to raise their income, constrained their credit, and were reasonably knowledgeable about relevant government programs and banking services. These findings were noted when respondents were studied qualitatively, thus suggesting success in studying financial literacy qualitatively. Qualitative measures such as case studies and interviews allow researchers to ask questions that relate not just to one’s knowledge of financial matters, but also to the specific circumstances in which that knowledge is applied. Behavioral influence on personal financial decisions is sure to be exhibited in different socioeconomic situations, peer-influenced situations, and according to family value systems.

Behavioral issues such as family, peer, community, personal self-control, and socioeconomic status affect personal financial decisions either negatively or positively, regardless of financial knowledge. Research has shown that financial knowledge and financial behavior are closely related (Hogarth 2002; Kotlikoff&Bernheim, 2001; Peng et al., 2007). A rich body of literature has been developed to demonstrate that people differ in terms of the emphasis or weight they attach to long-term versus short-term outcomes of their behaviors (Bearden, Money, & Nevins, 2003; Strathman et al., 1994; Zimbardo & Boyd, 1999). Family money management differs according to the values of each family. Spending money wisely and choosing to save money equates with responsibility, which is learned behavior thatis usually derived from our parents.

Measuring Financial Literacy

Although there is no credible method for identifying financially literate individuals in a crowd, it is still possible to identify the basic elements required to navigate and survive the marketplace. For example, Huston (2010) found that when assessing respondents’levels of financial literacy, researchers employed questions covering a wide variety of topics including insurance, credit cards, mortgages, retirement savings, budgeting, inflation, and comparison shopping. Repeated use of “like”questions would increase a comparison of results across financial literacy studies, and it is not clear whether this approach is the most effective way to measure financial literacy. In fact, Huston stated there is currently no standardized measurement for financial literacy. Remund (2010) further acknowledged that there is no clear consensus regarding how to measure financial literacy.

Knoll and Houts (2012) took up the challenge and developed a measure using an item response theory (IRT). According to IRT, financial knowledge can be measured using a psychometrically-sound 20-item financial knowledge scale containing items from three national financial literacy surveys. Knoll and Houts (2012) explained, “Widespread use of this financial knowledge scale will enable researchers to confidently compare financial knowledge across studies, populations, and time”(p. 408). Knoll and Houts incorporated the questions Lusardi and Mitchell (2007, 2009) used in their study to develop IRT measurements. Lusardi and Mitchell’s work added to the credibility of the IRT measurement as a useful and effective means to predict financial knowledge. The IRT measurement is preliminary and not standardized; nonetheless, it is important to the future of measuring financial literacy. Although contributory toward the measurement of financial knowledge, the clarity of what to measure is unclear.  Thus,a gap in the literature as to how financial literacy is defined exists. The question also remains as to how financial knowledge transfers to one’s management of their personal finances.

Insurance literacy is a component of financial literacy. Insurance understanding is very complex. Huston (2010) proposed insurance literacy was not a primary focus of financial literacy researchers, while saving and investing were a major focus. Studies have shown that the majority of people purchase insurance policies based on someone’s recommendations. Comparing insurance rates and products from different companies is less of a basis for a decision. Once again, this behavior points to potential influences as a critical factor when teaching personal financial managements. Those who accept the advice of others when making insurance purchases tend to score lower on insurance literacy quizzes. One must take the time to make comparisons and have the confidence to make the correct decision once the information has been obtained. Tennyson (2011) proposed there is a positive relationship between insurance knowledge and confidence in decisions related to financial matters.

Teacher Influence

Ironically, though a teachers’influence is typically ranked at the top of the scale for predicting student success, “almost nothing is reported in the research literature on economic teacher’s views of any financial literacy curriculum, how they teach the subject matter, and professional development”(Mandell& Klein, 2009, p. 16). According to the NEFE (as cited in Kadlec, 2012), although 89% of K-12 teachers agree that students should be required to take a financial education class, more than 60% of those teachers do not believe they are qualified to teach personal financial management (para 6).

One success story comes from the state of Mississippi, a state in which leaders require economics classes for high school students. In Mississippi, teachers receive training before they teach economics to students. The Mississippi Council on Education (Smith, 2010) provides free training in economics for public school teachers throughout the state, and moreover, encourages entrepreneurialism among its students. This council is recognized as one of the top 10 in the nation for its promotion of economic education.

Mathematical Influence

Many believe that secondary math achievement is a key predictor of the long-term economic potential of a nation (Grimes et al., 2010; Hurst, 2005; Lopus& Maxwell, 1994; Slavin, Lake, & Groff, 2009). As Alan Greenspan, who served as Chairman of the Federal Reserve of the United States from 1987 to 2006, (The State of Financial Literacy, 2002) noted in his statement before the Committee on Banking, Housing, and Urban Affairs in the U.S. Senate, “Focusing on improving fundamental mathematics and problem-solving skills can develop knowledgeable consumers who can take full advantage of the sophisticated financial services offered in an ever-changing marketplace”(Bernarke, 2013).

The study and mastery of mathematics is required for passing grade requirements and standardized tests. So often, however, economics, business, and personal financial management courses are taught as a component of mathematics. Slavin (2008) stated the most important problem warranting resolution in mathematics education is the gap in performance between middle- and lower class students and between White, Asian, African-American, Hispanic, and Native-American students. If the research proved this true, then would this gap be a big problem facing personal financial management education?

Gerardi, Goette, and Meier (2010) asked themselves whether a borrower’s financial literacy may have played a role in the subprime mortgage delinquency which contributed to the global crisis of 2008. Their findings “show a significant and quantitatively large association between one aspect of financial literacy, numerical ability, and mortgage delinquency”(Gerardi, et al., 2010, p. 29). In their research, Gerardi et al. determined foreclosures were 66% lower among those who had higher numerical ability. These findings suggest the educational influence of mathematical classes and financial literacy, although “The results do not completely rule out the possibility that limitations in financial literacy led to unfavorable mortgage terms or contracts that contribute to unfavorable mortgage outcomes”(Gerardi et al., 2010, p. 30). In other words, in personal financial matters, even the most educated borrower is a“slave to the lender”(Proverbs 22:7, King James Version).

Personal Financial Literacy and Gender

Women represent a different dynamic when considering financial literacy. Although statistics and the general research community are in agreement that women are less financially literate than are men, the factors contributing to this difference is less understood.

As De Bruine et al. (2010) noted, “Higher inflation expectations have been reported by individuals who are female, poorer, single and less educated”(p. 381). Relatively higher inflation expectations are also noted as problems for non-White women and low versus high income levels. Zissimopoulos, Karney, and Rauer (2008) found that less than 20% of middle-aged college-educated women showed a greater ability to answer a basic compound interest question, compared to approximately 35% of college-educated males of the same age. Chen and Volpe (1998) found similar gender differences at younger ages.

Fonseca, Mullen, Zamarro, and Zissimopoulos (2012) conducted a study on the factors contributing to this difference. The study consisted of 1,526 respondents (827 women and 699 men) who reported details of financial decision making in the household. The goal of Fonseca et al. (2012) was to determine the mitigating factors of gender differences in financial literacy. Although an equal number of men and women were presented with the 23-question surveys, a higher number of women responded. Questions posed in the survey related to basic financial concepts, investing, life insurance and annuities, and were answered using the 13-item scale used by Lusardi and Mitchell (2006). Of the 13-item scale, five items measured numeracy and understanding of compound interest andinflation, alongside eight items measuring knowledge of the stock market, stocks, bonds, mutual funds and diversification. The index also includes six additional items measuring knowledge of stocks, bonds and mutual funds and four items measuring knowledge about life insurance and annuities based on different questionnaires (Fonseca et al., 2012).

The findings of Fonseca et al. (2012) suggest that gender differences are the result of men specializing in making household financial decisions, allowing them to acquire financial knowledge, in contrast to which women specialize in other household functions. Simply, according to this study, men tended to be more financially literate than women because they acquire more knowledge through practicing making household financial decisions. Fonseca et al. (2012) agree that more research is needed to understand how the intensity of involvement in financial decisions increases financial knowledge, and more importantly, how this knowledge is used.

Summary

Based on existing research, financial education is available for every grade level of public school systems in the United States. Despite its availability, two problems exist. Although the NEFE curriculum used in this research was evaluated in 1994 and 2006 by Danes, few curricula have been evaluated for effectiveness (Lyons et al., 2006). As Rosacker, Ragothaman, and Gillespie (2009) noted, “Much of the academic research surrounding financial literacy has focused on assessments of individual knowledge levels and of the direct consequences of low financial literacy”(p. 392). Therefore, the majority of resources available have not proven to be effective in promoting financial literacy at every grade level.

Second, financial literacy education is not promoted as being equally valuable to the learning experience as other disciplines, based on educational system requirements. Reflecting upon the impact of the economic global crisis on the United States, Bernanke (2013) underscored the critical value of effective educational efforts to improve knowledge and understanding of key economic concepts. Suiter and Meszaros (2005) reported that in 2001, more young people filed for bankruptcy than those who graduated from college. The Jump$tart Coalition administers surveys every 2 years in American high schools in order to test how high school students fare in personal financial concepts. Although Lucey (2005) questioned the reliability and validity of the Jump$tart surveys, it is a consistent measurement of basic financial practices inherent to our culture. The surveys began in 1998, and with the exception of a slight increase in knowledge of balancing a checkbook, understanding earning, spending, and saving in 2004 and 2006; the percentages have continued to decline (Jump$tart 1998, 2000, 2002, 2004, 2006, 2008). Godfrey (2006) reports that research has shown that as little as 10 hours of instruction positively impacts students spending and saving habits. “Among the lessons of the recent financial crisis is the need for virtually everyone, both young and old, to acquire a basic knowledge of finance and economics”(Bernanke, 2013, p.1).

Various government agencies, corporations, and financial experts are represented in this review and quoted as supporting increased financial education in public schools. Offering financial curricula for the purposes of education is one such way. The High School Financial Planning Program, written and published by NEFE (n.d.), is the curriculum chosen to teach middle school children personal financial management concepts. It is during this formal operations stage of intelligence, according to Piaget (1981), that a child reaches his or her greatest level of development and the child becomes capable of applying logical reasoning to all classes of problems (Wadsworth, 2004, p. 26). Teaching goal-setting techniques to the middle school child accomplishes this goal.

Based on Piaget’s theory (1981) and the longevity and outcome of Danes’s (2010) evaluation of the NEFE curriculum, the choice was made to use the NEFE curriculum as the training resource for the quantitative research in this study. This research identified specific financial goals best understood at an eighth-grade level, and whether the NEFE curriculum actually influenced the spending patterns of eighth-grade students 3 months after program participation. The results of this study contributed to the knowledge base of effective personal financial management educational resources, and concluded that the definition of financial literacy for this research is: A financial literate young adult will understand the financial concepts of budgeting, saving, investing, and spending.

What does our economic future look like? Short-term financial decisions will continue to affect long-term financial outcomes. Differing socioeconomic statuses will remain, and the marketplace will likely continue to endure and sometimes struggle. Corporate rules and governmental policies will change. Future financial decisions made both personally and at the corporate level will affect students educated in public school systems. Future research should encourage educational leaders to consider, implement, and support an educational agenda for the promotion of financial literacy. To produce financially literate adults, collaborative efforts must be made by government, corporation leaders, and financial experts.

CHAPTER THREE: METHODOLOGY

Introduction

This study was designed based on a study of the curriculum, High School Financial Planning Program (NEFE, n.d.). Based on the research, how financial education was presented in an eighth-grade classroom in a southeastern U.S. public school influenced spending behaviors regardless of socioeconomic status and ethnicity influences. The research design included a pretest-posttest survey and 15 multiple-choice questions.

Design

This research defines financial literacy as this:  A financial literate young adult will not only understand the financial concepts of budgeting, saving, investing, and spending but will employ their knowledge of these topics by changing their spending behaviors.The findings willindicate that the NEFE curriculum accomplishes its goal of motivating students to change financial spending behaviors.  The proposed research may benefit the financial literacy of the next generation of U.S. students in three ways.  First, it may create more awareness of eighth-grade students’ levels of understanding of basic personal financial concepts.  Second, it may clarify, based on eighth-grade students’ level of cognitive and intellectual development, which financial concepts can be understood and practiced.  Third, the research may contribute to the knowledge base of appropriate financial concepts and appropriate financial goal-setting techniques for educators of personal financial management.

Effectively executing these practices is taught within the High School Financial Planning Program (HSFPP). A one-time evaluation immediately following instruction allows only short term results to be analyzed. It is possible for students to merely memorize the material, as opposed to actually having time to put the information into practice.Evaluating the student 3 months after instruction was intended to provide more knowledge about the full impact of the study.

In order to build an important link between the short-term, intermediate and long-term goals, the researcher sought to examine the changes in behavior,instead of only the knowledge learned.Examing behavior changes in the participants was measured by asking five questions regarding spending behaviors before participating in the High School Financial Planning Curriculum and asking the same five questions after participating in the curriculum. The questions were answered based on a Likert Scale indicating degrees of behavioral change.  There was no option in the survey for the student to comment on spending behavioral changesor to elaborate on why they were motivated to positively change their spending behaviors.  However, the questions in the survey specifically asked questions relating to budgeting, savings, investing and spending, financial concepts taught in the curriculum used.

Research Questions

Two associated research questions were answered in this study based on the data collected. The research questions are as follows:

RQ1: Do eighth-grade students report making better financial decisions regarding budgeting, saving, investing, and spending 3 months after they are taught financial goal-setting techniques as part of their high school financial planning curriculum?

RQ2: Do students who are exposed to the curriculum of high school financial planning report a better understanding of time-bound financial goal setting than students who are not taught the curriculum?

The study was designed to examine spending pattern changes presented by middle school students who participate in a financial literacy curriculum created by NEFE (n.d.) and made available on the state public school system website in which the study was conducted. Spending pattern changes were measured when financial goals were taught in the classroom. Survey questions were adopted from Danes’ (2004) survey instrument questions and from the NEFE evaluation section of the curriculum to test the effectiveness of the NEFE curriculum, specifically Unit 1, Your Financial Plan. This chapter describes the study participants, instrumentation, procedures, internal validity, and the data analysis of the study.

Participants

The financial curriculum (NEFE, n.d.) used in this study was designed for high school students, but was written at an eighth-grade level. Therefore, the research evaluated the effects of the study in three eighth-grade classrooms. The study was based on tests administered during the months of October 2010–February 2011. The study population was three eighth-grade classrooms in a single Title 1 school in the southeastern United States. As Malburg and Lorcher (2012) explain,

Title 1 is the nation’s oldest and largest federally funded program, according to the U.S. Department of Education. Annually, it provides over $14 billion to school systems across the country for students at risk of failure and living at or near poverty. (Malburg&Lorcher, 2012, para. 2)

In preparation for this study, the researcher telephoned the principal of the target southeastern U.S. middle school and made an appointment to assess the curriculum.A discussion was held as to whether to present the financial educational program to all eighth-grade students, or only those in one classroom. The decision was made to include all eighth-grade students in the study; thus, the sample population was 248 eighth-grade students. An application was submitted for conducting research to the director of research and evaluation of the target school system and the research was approved. Subsequently, the program was followed in all three eighth-grade classrooms from October 2010 to February 2011. The number of students per classroom is presented in in Table 1.

 

 

 

Table 1 Classrooms and Populations

Classroom nicknameParticipants Tarheels                                                             89 Blue Devils                                                        85 Dogs                                                                   74

Table 1

 

Program participant characteristics.

This section describes the demographics of the 248-student sample group who completed the NEFE (n.d.) HSFPP Part 1 follow-up assessment, administered 3 months after program completion.

Gender. There were almost equal numbers of boys and girls in the study. There were 130 (52.4%) boys and 118 (47.5%) girls.

            Ethnicity and race. Program participants were asked to report their ethnicity and race. The majority of students self-reported as White or African-American; however, the Hispanic population was significantly higher than the state average for Hispanic students. This difference could be partly because of the Title 1 status of the school or because more Hispanics reside in the particular county where the research was conducted. The reason why the Hispanic population in the study was higher than the state average exceeded the scope of the study. The frequency distribution and percentages of students by race are indicated in Table 2.

Table 2 High School Financial Planning Program Participants by Ethnicity/Race (n, %)

Program populationState average American Indian                                  0                                                  1 Asian                                                    3                                                  2 Hispanic                                              48                                                 9 Black                                                   96                                                30 White                                                 101                                                54 Unknown                                             0                                                    4

Table 2

 

Socioeconomic levels. The southeastern U.S. middle school in which this study was conducted is a Title 1 school. As such, the socioeconomic levels of the students are an important variable in this study. The percentage of students receiving free lunches was only 4% higher than the state average of students receiving free lunch; however, the percentage of students receiving reduced-price lunch was higher, thus indicating a lower socioeconomic level than that of the average student in the state. Low-income populations tend to be more myopic when making financial decisions and have higher inflation expectations (De Bruine et al., 2010; Zikmund-Fisher & Parker, 1999). Those totals are presented in Table 3.

 

Table 3 High School Financial Planning Program Participants by Free/Reduced-Price Lunch Eligibility (%)__________________________________________________________________________ Program populationState average Free Lunch                                               75                                                    26 Reduced-priced lunch                               45                                                     7

Table 3

 

Setting

This research was conducted in a southeastern U.S. middle school. The school provides standard instruction to sixth-, seventh-, and eighth-grade students. The school is located in the fourth largest city in the state; therefore; the students are from suburban backgrounds, rather than rural settings. The city has a current population of nearly 500,000 and is affiliated with two nearby cities, composing the 30th largest metropolitan area in the United States with a current population of nearly 1.6 million individuals. The median household income is $41,202, compared to the median household income of the United States of $52,029. The average age of occupants in the city is 35.3 years. The school system within which the research was conducted includes 51 elementary schools, 25 middle schools, and 13 high schools (City-data,n.d.).

Instrumentation

The biggest methodological problem that undermines the results of financial literacy education studies has been the lack of adequate controls needed to demonstrate the causal links from education to literacy to financial decisions and behaviors (Willis, 2008). More important than the immediate effects of personal financial management curriculum is whether the program has any lasting effects on participants who complete the program. Concise evaluations of all available personal financial management curricula available for students in elementary through high school are relatively easy to locate, but evaluation methods are, for the most part, not as easy to find. In fact, the only evaluation methods reported are the numbers of schools or individuals using the various curricula. In most cases, evaluation methods reported were descriptive in nature, which indicated a user’s mathematical knowledge rather than behavioral changes when goal-setting.

To address this shortcoming, a thorough search was made of the Mental Measurements Yearbook (Carlson, Geisinger, & Jonson, 2014) and the most recent Tests in Print (Murphy, Geisinger, Carlson, & Spies, 2011). Financial literacy, and the related topics of financial behavior changes, personal financial management, personal economics, pre- and posttests, and financial literacy were the focus of the search. No tests were found that evaluated spending behavioral changes made as a result of financial education.

To address this issue of testing spending behavioral changes after financial education, the researcher looked tothe CEE and the NEFE,  twogovernmental foundations tasked to identify what a financially literate individual looks like.  The CEE is focused on the economic and financial education of students from Kindergarten through high school.  The CEE has historically advocated that personal financial education classes be taught in every school system in the United States in grades K-12, and that classes and testing be a graduation requirement for high school students.  Having been established in the 1950s, more than 55,000 teachers have been trained by the CEE and, in turn, have taught personal financial management skills to more than 5 million students. No research was available to examine the effectiveness of the CEE in its’teacher training programs.  Additionally, since 1984, NEFE has created and supported financial programs that help students and adults navigate their financial futures.  The High School Financial Planning Program (HSFPP), a product of NEFE (n.d.), is one such program and the curriculum used in this research study to educate and test financial knowledge obtained by eighth-grade students.

After a thorough search for testing methods, the methods for NEFE(National Endowment for Financial Education) were evaluated. NEFE evolved from the College for Financial Planning, a Denver-based nonprofit organization that served as the first financial-planning educational institution in the nation. As the college grew, diversified, and advanced its interaction with the public, its trustees and management recognized a critical need for ongoing educational efforts that could provide reliable, impartial financial information to consumers, particularly the underserved. To meet that need, the trustees created the National Endowment.

As a result, on January 29, 2010, President Obama signed Executive Order 13530 creating the President’s Advisory Council on Financial Capability. Chairman of the Council Rogers wrote in the final report issued by the council in early 2013, “Our charge, to assist the American people in understanding financial matters and making informed financial decisions, remains a critical one at this particular time in our nation’s history and for building a vibrant, informed citizenry”(“President’s Advisory Council on Financial Capability,”2013, p. iii).
Ted Beck, president and CEO of the NEFE, served on this committee in addition to serving as a member of the President’s Advisory Council on Financial Literacy, a member of the Federal Deposit Insurance Corporation Advisory Committee on Economic Inclusion, and also as the chairman of the board of Jump$tart.

The High School Financial Planning Program (HSFPP), created by NEFE, and advocated by it’s President and CEO, Ted Beck, is a competency-based curriculum on personal finance provided to educators at no cost, the goal of which is to provide students with the tools needed to perform seven core competencies (see Table 4).

Table 4 NEFE Seven Core Competencies, by Unit

Unit Target competency taught 1                                                                                      Create a personal financial plan 2                                                                                      Create a personal budget 3                                                                                      Propose a personal saving and investing plan 4                                                                                      Select strategies to use in handling credit and managing debt 5                                                                                      Demonstrate how to use various financial services 6                                                                                      Create a personal insurance plan that will minimize your personal or financial losses 7                                                                                      Examine how career choice and lifestyle affect your financial plan

Table 4

 

Since 1984, the HSFPP has reached more than 8 million students, thus strengthening the reliability of the NEFE instrument in this research (NEFE, n.d.). The HSFPP learning outcomes sponsored by NEFE were drawn from industry expectations and the following national academic standards related to personal finance: Jump$tart (2000, 2002, 2004, 2006, 2007, 2008), National Standards for Business Education-Economics & Personal Finance (National Business Education Association, n.d.), CEE (2010) Voluntary National Content Standards in Economics, and National Standards for Family and Consumer Sciences Education and Partnership for 21st-Century Skills (National Association of State Administrators of Family and Consumer Sciences, n.d.).

NEFE periodically updates the HSFPP, and, after instructors have used each updated version for at least 2 years, conducts research to examine its effectiveness. Most recently in 2009 and 2010, Sharon Danes led these evaluations.  The evaluation study sample included 212 teachers and 4,794 of their students, and was designed to assess students’ knowledge, behaviors, and confidence before and after studying the HSFPP as well as teachers’ evaluations of the curriculum.Study results suggested that the HSFPP is both effective with students and viewed previously among educators (Danes, 2010). For example, students were asked 17 core questions about their financial knowledge (seven), financial management behaviors (nine), and confidence (one) about managing finances and reported improvement in all areas. after the HSFPP was taught, and 97% of the instructors surveyed said they would recommend the HSFPP to colleagues.The one area that did not report a gain in financial knowledge was in the knowledge of auto insurance via a follow-up survey 3 months later. (High School Financial Program, 2016)  Using this design enabled the researcher to account for changes in learners’ behavior and knowledge after the completion of a program by allowing students to report present behaviors (post) and how they perceived those same behaviors before the program (pre). Use of a post-then-pre design has been reported to minimize shift-bias in self-reporting (Danes et al., 1999; Howard & Dailey, 1979; Howard et al., 1979; Rockwell & Kohn, 1989). Danes’ (2004) instrument was selected based on its success in the 2010 evaluation of the NEFE curriculum and the impact of a financial planning curriculum designed to measure financial behavioral changes.

Sharon Danes, an authority in financial literacy, and a part of President Obama’s team to ensure American’s understanding of financial matters, created the six questions used as part of the post-then-pre assessment in the present study. Danes’ self-assessment questions were administered to assess program participants’ behavioral changes 3 months after completing the HSFPP (NEFE, n.d.). No other testing or survey resources were found that addressed the financial goal-setting techniques necessary to answer the research questions for this project, specifically regarding matters that address behavioral changes. No other testing or survey resources were found that tested the effectiveness of a curriculum that teaches budgeting, saving, investing and spending, based on goal-setting strategies, which supports the definition of financial literacy for this research.

To design a credible study and better assess spending changes in students after completing the HSFPP (NEFE, n.d.) curriculum, aninstrument was selected from HSFPP. Fifteen multiple-choice questions chosen from the end of Chapter 1 of the NEFE (n.d.) financial literacy curriculum were employed.The NEFE instrument chosen for the present research indicates strong construct validity (see Appendix C).To examine the reliability of the instrument, Cronbach’s Alpha was run in SPSS resulting a measurement of .548.  An alpha level of .70 or above is typically considered acceptable (Tavakol and Dennick, 2011).  The low alpha value for the multiple choice measure could be due to a lack of relatedness among individual questions.  In fact, Chronbach’s Alpha increases to .603 if item 10 is deleted.

The Chronbach’s Alpha increase to .603 with the deletion of item 10 of the 15 multiple choice questions suggests that if item 10 was deleted from this research, then the research instrument would yield a higher reliability. Although the increase of .548 to .603 is still an unacceptable measurement based on Tavokol and Dennick’s (2011) study establishing .70 as an acceptable and reliable measure, the increase is significant enough to suggest that the item be deleted from the survey instrument for this research until the particular item is revised. The primary goal is that all items are internally consistent; basically meaning that all items measure the same thing and are correlated. Revising item 10 with the intention of creating a more internally consistent measurement and reintroducing into the survey instrument for this research may or may not increase the Cronbach’s Alpha score.

Additionally,  a portion of Danes’ (2004) survey instrument to evaluate the NEFE curriculum in 2010 was also used. The Danes survey included six questions that were asked regarding personal financial management before the curriculum was taught and the same questions were asked after studying the curriculum. The questions specifically measured spending behavioral changes. Cronbach’s Alpha for the Danes Survey was .942, indicating that it is a reliable measure.

Financial literacy researchers have found that a better measure of program success would include follow-up studies with program participants (Lyons et al., 2006). Evaluations that neglect to follow up after participants have been given time to put the desired behavior changes into practice do not capture the full extent of program-induced changes. Willis (2008) suggested that a comparison of participant self-assessments of knowledge and skills before and after participation is warranted. Despite inconsistencies in evaluation, there are some programs that have undergone rigorous and thorough evaluations using pre- and posttest questions. The NEFE (n.d.) HSFPP is one such program.

Procedures

To obtain the data, the researcher and school administrator were contacted and the nature of the proposed research was discussed. Permission was obtained from the school administrator to conduct the study (see Appendix A), after which an IRB application was completed and approved (see Appendix B). The curriculum was obtained and distributed among the three social science teachers at the southeastern middle school at which the study was conducted. The number of toolkits obtained was chosen to match the estimated number of students participating in the study. Each student received a workbook and each teacher received a teacher edition of the workbook. Additional website assistance was available to all instructors and all resources were obtained at no cost.

Survey self-assessment tests were copied and distributed to the social science teachers. The Social Science teachers were instructed by a letter contained in their instructional material to complete the self-assessment survey procedures, seal the completed surveys in a large envelope provided for the purpose, and return the completed surveys to the researcher. The social science teachers declined the researcher’s offer of training in accordance with the NEFE curriculum before the curriculum was presented to their students. Dates for completing the financial program and survey were identified in the social science teachers’ instructional material: completion of the instruction was completed by October 2010 and completion of the survey was completed by the first week of February 2011, thus creating a variability of one week past the three month period of instruction.

Data Analysis

The survey instrument included two parts, the Danes 2004 pre and post test survey and the HSFPP 15 multiple-choice questions (see Appendix C). The five pretest-posttest statements were analyzed using a Likert scale. Likert-type scales use fixed choice response formats and were designed to measure attitudes or opinions.They measure levels of agreement and disagreement, and a respondentRespondents choose a number that represents a range of values from 1 to 5 (1 = almost never and 5= almost always). One study, (Raaijmakers, Van Hoof, Harm, Verbogt and Vollebergh 2006),  suggest that Likert scales used to test behavior changes in adolescents is problematic. Based on the survey instrument used in this research, respondents have the option to choose a number 1-5, 1 being almost never and 5 being almost always. This would indicate that if the respondent chose the number 3, that would indicate a mid-point between the two extremes. Raaijmakers, et. al (2006) state that the midpoint of any likert scale suggests two meanings. “This is a clear indication that midpoint responses have two possible meanings: not only a true neutral meaning, occupying the middle position between two opposed substantive meanings, but also a meaning in the sense of ‘undecided’, by which the respondent indicates that he/she is not yet able to express a definite opinion, but would still like to give a genuine response(Raaijmakers et al., 2000). Based on the nature of likert scale measurement, there is no way to determine the actual meaning of the response. Introducing another option to the likert scale that would indicate an ‘undecided’ option would help to eliminate the potential threat of not knowing the true answer of the midpoint number in any likert scale, however not erase the possibility that the respondent answered the question neutrally because they did not know the correct answer.

The ordinal data were analyzed using a parametric t test. As Willett (2013) explained, “It is common to see ordinal data analyzed using parametric tests, such as the t test or an ANOVA” (para. 4).

Gardner and Martin (2007) and Jamieson (2004) contend that Likert data is of an ordinal or rank order nature and hence only non-parametric tests will yield valid results, however Vigderhouse (1977) found that the interchangeable use of parametric and non-parametri tests on ordinal data results in different conclusions. Creswell (2008) suggests that for Likert data to be treated as interval data there is need to develop multiple categories within a scale, establish equality of variance between each value on the scale and normality of the data (Murray, 2013).

The Jamieson (2004) argument basically is that when parametric tests are conducted on Likert scale data, researchers run the risk of coming to the wrong conclusion.  The fact that parametric statistics can be used with Likert data, with small sample sizes, with unequal variances, and with non-normal distributions, with no fear of coming to the wrong conclusions is supported as well (Geoff, 2010).

A paired sample t test was run using the before and after scales for each of the two research questions. There were no questions unanswered or left blank. The results from the paired t tests were evaluated and will be reported in the data analysis section. The results were compared to results yielded in previous studies, as reported in the literature review, and past research findings on financial literacy.

Next, 15 multiple-choice questions were asked to determine which goal, short-term, intermediate, or long-term, is best understood by an eighth-grade student. These questions were closed-ended, meaning students were required to choose from one of three options. The appropriate data were analyzed by dependent and independent t test and normality using SPSS, Version 20. Frequency distributions and percentages were calculated for each question related to budgeting and saving. The results will be used to answer the research questions in chapter four and provide implications for financial literacy in grades K-12. The implications will be used to suggest future research options.

Responses to the survey instrument included closed-end questions and were analyzed by SPSS. Frequency distributions and percentages were calculated for each question related to budgeting and saving. A paired sample t test was run using the before and after scales for each question. The results from the paired t tests were evaluated and will be reported in chapter four. The results were compared to results of similar studies reported in the literature review on financial literacy and used to answer the research questions to provide greater insight into financial literacy of students in grades K-12. The implications will be used to suggest future research options.

 

 

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