The asset test

Director, Citigroup Office of Financial Education

Should financial education form part of standard school curricula, alongside history or mathematics?

You cannot expect someone to be able to build a house just by giving them a saw, a hammer and some wood. Likewise, you cannot expect someone to be able to manage their finances just by giving them an income, a mortgage, a credit card and an insurance policy. People need to be taught how to use these tools in order to succeed.

Simple skills like saving and investing, budgeting and using credit wisely are crucial for young adults to master. The best starting point is in school because many parents are poorly informed about personal finance issues and may not be the best role models. Even parents who are savvy about money matters often find it difficult to talk to their kids about money; it remains a taboo subject. Kids will eventually need to learn financial survival skills and school is the best place to get the job started. So how effective has their education been?

Learning about money is more often taught through the trial and error method than through formal education. Though personal finance is a necessary life skill like reading and writing, it is not treated as such in all but a handful of our school systems around the world.

In the US, the Jump$tart Coalition for Personal Financial Literacy has been conducting a biennial survey since 1997 to ascertain the financial literacy level of high school seniors. The 2005 results have just been released, with an average score of 52%–a failing score on most US grading scales. The survey reported that only 16% of the respondents had taken an entire course in personal finance in high school. A slightly higher percentage, 30%, received at least a week of instruction within another subject, such as economics or mathematics. Jump$tart’s survey provided empirical evidence that not enough young adults are receiving this critical instruction and the vast majority are unprepared financially to enter the “real world”.

An OECD report produced by its Financial Education Project found that relatively few countries have conducted surveys of financial literacy levels. The report identified surveys in Australia, Japan, Korea, the UK and the US. Each of these varied from the others in terms of questions asked, the characteristics of the population surveyed, and the goal of the survey. However, the conclusion of all of them is that consumers are lacking in information about financial issues and need financial education.

The good news is that the tools to address the problem, such as curriculum and teacher-training programmes, are abundant. For example, the Jump$tart Coalition’s web site (, contains a Clearinghouse database of over 600 high quality education materials for students in all grades. However, the challenge is to drive demand up to equal the supply.

One of the most formidable obstacles is the fact that standards or guidelines determine what ultimately ends up in the curriculum in many countries. For example, by 2004 in the US, only nine states out of 50 included personal finance instruction within a required class. However, in 2005, seven states passed legislation making this inclusion a requirement in coming years. Currently in 2006, there are over a dozen states with similar pending legislation. The role of legislation in affecting educational policy cannot be emphasised enough. The trend seems to be that more and more legislators and government agencies are taking up this challenge. Since most countries determine educational policy on a local or state level, that means encouraging all local jurisdictions to make personal finance education a required subject.

There is an exception, however, because in the UK, personal finance instruction is included within national curriculum standards. One driver behind this is the Personal Finance Education Group or pfeg for short, a non-profit charity set up to help teachers to develop financial capability in young people. Its professed aim is “to make sure that all young people leaving school have the confidence, skills and knowledge in financial matters to take part fully in society” (see Pfeg has established a “quality mark”, which identifies materials that have been vetted for excellence by professionals and takes much of the guesswork out of selecting teaching resources. The Citigroup Foundation funded a project with pfeg to demonstrate how personal finance education could be delivered as early as the primary curriculum through developing a management handbook for teachers and school heads.

Financial education works. For example, research conducted by Stanford University, entitled “Education and Saving: The Long-term Effects of High School Financial Curriculum Mandates”, showed that education policies mandating instruction on topics related to household financial decision-making led to a gradual increase in assets of affected students. The gain was equivalent to an additional year of net income over the course of an average individual’s lifetime.

Furthermore, the National Endowment for Financial Education’s High School Financial Planning Program® has been shown to have made a significant, positive difference in the personal financial behaviour of teens. The study found that three months after students completed this programme, some 60% had changed their savings patterns to save for what they wanted or needed or, in some cases, every time they received money. Moreover, almost 60% had adopted wiser spending patterns.

Additionally, Citigroup has a well-respected and proven curriculum, with lessons as early as kindergarten and on through adulthood. A recent study of this curriculum’s effectiveness with a control group of low-to-moderate income adults showed that after receiving instruction, 17% more followed a budget; 20% more developed a financial plan; 7% more balanced their checking account; 8% more contributed to a retirement account; and 6% more became home owners.

Meanwhile, a survey of adult workers who were exposed to workplace financial education showed that participation and contributions to voluntary retirement savings plans were higher, particularly among non-highly compensated employees.

With Citigroup’s global presence (300,000 employees working in over 100 countries), our goal is simply to help people improve the quality of their lives and to help small businesses and institutions better their communities. Providing them with the information and tools they need to make sound and informed financial decisions helps achieve this goal.

In 2004, Citigroup and the Citigroup Foundation made a 10-year, US$200 million commitment to support financial education globally. In 2005, financial education support equalled almost $30 million, funding initiatives in 68 countries. As we move forward, Citigroup will continue to strive to make a positive difference and contribute to the communities where we live and work. We are also delighted to be working alongside the OECD to further this work. It is the foundation of the company’s community commitment and a value that is deeply embedded in our corporate culture. That is why financial education is, and will continue to be, a major focus of the philanthropic efforts, business programmes and employee volunteer efforts of Citigroup in the years ahead.


Bernheim, et al. (2001), “Education and Saving: The Long-Term Effects of High School Financial Curriculum Mandates”, Journal of Public Economics Vol. 80, available at

Bayer, et al. (1996), “The Effects of Financial Education in the Workplace: Evidence from a Survey of Employers”, NBER Working Paper 5655.

OECD (2005), Improving Financial Literacy: Analysis of Issues and Policies, Paris.

©OECD Observer No 255, May 2006

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