New Book By UB Management Dean Says Today's Students Likely to Become Tomorrow's Financially Strapped Adults

BUFFALO, N.Y. -- The graduation parties are over and the summer is drawing to a close, but the financial future isn't so bright for America's high-school Class of '98, or for the millions of American teens who will follow in their footsteps.

Debt, bad credit, poor retirement planning and even bankruptcy lie ahead for many of America's youth, according to a new book authored by Lewis Mandell, dean of the University at Buffalo School of Management.

"Our Vulnerable Youth: The Financial Literacy of American 12th Graders" (Jump$tart Coalition for Personal Financial Literacy, 1998), provides an eye-opening look at the current state of personal-finance literacy among American teen-agers. It contains facts and details from Mandell's 1997 benchmark survey of more than 1,500 12th graders, as well as the actual questionnaire used to determine students' financial literacy.

Overall, students answered correctly just 57.3 percent of the 31 questions in the survey. And only 10.2 percent scored a "C" or better.

"The results show that a startling percentage of students leave high school without a basic understanding of personal finance," Mandell says. "In a society where one's well-being is strongly tied to the success of one's financial decisions, that's a bit like sending lambs out to the slaughter."

"For instance," Mandell continues, "many students go off to college not realizing that they can do permanent damage to their credit rating by not paying their phone bills. Then when they want to buy a house years later, those unpaid bills come back to haunt them, making it difficult to get a mortgage."

Mandell says it is not enough to simply provide students with hands-on experience in credit-card use, purchasing stock or balancing a checkbook. According to the book, students who don't use credit cards had higher test scores (57.9) than students who have their own cards (53.3) or use their parents' cards (57.7). Also, those who own securities (either stocks or mutual funds) had lower test scores (56.6) than those that don't own them (57).

"This surprising finding indicates that experience alone is not a good teacher," Mandell says. "Unless it's accompanied by conceptual or theoretical understanding, experience adds little to a young adult's ability to maneuver within today's complex world of financial services. We need to provide them with a fundamental understanding of personal finance and impress upon them that poor financial decision-making can have devastating consequences."

Mandell advocates creation of new personal-finance courses and improvement of existing courses in primary and secondary schools nationwide. He has worked with Jump$tart to develop educator guidelines (contained in the book) for implementation of personal-finance curricula designed for the nation's 50 million students in grades K-12.

Mandell also has helped author a bill now before a congressional committee that will make personal finance a fundamental life skill to be taught throughout the nation's school systems.

o Have children open a savings account, in their own names, as early as possible and explain to them the value of saving money and setting short- and long-term financial goals. Show them the interest that is posted to their statements.

o Charge children, especially teen-agers, interest when lending them money to show that debt and credit are always accompanied by a financial responsibility, which can't be ignored and must be properly managed.

o Purchase small sums of stocks for or with children and encourage them to follow the stocks' progress in the newspaper. Explain to them the risks and rewards of the stock market as opposed to other investment strategies, such as savings accounts.

"Personal finance should not be a taboo subject among parents and children," Mandell says. "The sooner we begin to educate children on personal-finance fundamentals, the more likely they are to make sound financial decisions as adults."