Financial literacy is a basic life skill and a need to know — and now it’s more relevant than ever

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Knowledge @ Wharton


  • One in five teenage students in the U.S. lack basic financial literacy skills, data from the Program for International Student Assessment (PISA) showed.
  • Financial literacy is a basic life skill that is more than a nice to know, it’s a need to know. And now it’s more relevant than ever.

Not everyone aspires to be an investment manager when they leave school, but the core elements of financial literacy should be common knowledge.

This is particularly true today, in an increasingly global economy where people are spending more and living longer. Understanding how to manage personal finances is critical for anyone, and it helps to start young.

Unfortunately, we are not quite there yet. One in five teenage students in the U.S. lack basic financial literacy skills, data from the Program for International Student Assessment (PISA) showed. Among adults, only 20% of those polled by the Financial Industry Regulatory Authority (FINRA) in a study said they were offered and have participated in some form of financial education. It seems the country has a lot of work to do on the financial literacy front, and many teachers appear to agree.

About 89% of Kindergarten through grade 12 teachers surveyed by the National Endowment for Financial Education (NEFE) said that students should either take a financial education course or pass a competency test for high school graduation. Some states have taken this a step further and made personal finance courses a requirement for high school students. However, getting to where we need to be in financial literacy as a nation will take substantial effort.

Right now, only 17 states require personal finance courses, according to the Council for Economic Education’s Annual Survey of the States. One reason for the gap could be the lack of teachers with the necessary background to teach personal finance topics, as only 20% of teachers in the NEFE survey said they believed they are prepared to do so if given the opportunity.

While progress is slower than we would like, we believe these steps are evidence that there are others who believe in the importance of financial literacy and preparing people during their youth to make informed financial decisions.

CEO of the National Financial Educators Council Vince Shorb has said, "College graduates spent 16 years gaining skills that will help them command a higher salary, yet little or no time is spent helping them save, invest and grow their money."

Former Chairman of the U.S. Federal Reserve (Fed) Alan Greenspan noted it once too. He believed that the number one problem in today’s generation and the economy is a lack of financial literacy.

So how do we continue to build on the steps that have already been taken in financial literacy in the U.S. and move it forward? One method that we have found to be an effective way to get students engaged and learn about financial literacy is through an investment challenge known as the KWHS Investment Competition.

$100,000 portfolio

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Aberdeen Standard Investments

Knowledge@Wharton High School (KWHS), a part of The Wharton School at the University of Pennsylvania, hosts a free, global, online investment simulation for students in grades 9-12. Each team manages a portfolio of $100,000 in virtual cash and follows their investments over 10 weeks using Wharton’s Online Trading & Investment Simulator (OTIS). Participants then submit a final report detailing their investment strategy, analysis and overall competition experience, and the top teams are invited to present their strategies to a panel of judges at the global finale.

A keen proponent of financial literacy, Aberdeen Standard Investments partnered with KWHS in 2012 to help develop the investment competition because we believe in educating students at a young age and also support the focus of this challenge on learning as opposed to maximizing the growth of their portfolios.

In the midst of trading hypothetical stock positions, students learn to work in teams, understand how various types of businesses are run, learn global economics and often a great deal about themselves and others. Students across the U.S. and around the world are allowed to enter, and it makes the students who participate that much more aware of the global community. Today, the competition reaches more than 3,000 students in 20 countries.

"Not only do we learn new knowledge but also care about what is happening around us," said Si Hai Yi Xin from the Experimental Middle School attached to Hebei Normal University in China, who has previously participated in the competition.

The Prophets team from the Amity International School, Section 43 in Gurgaon, India said, "we developed an inclination towards keeping in touch with the world around us, keeping an open eye towards all the possible developments, changes and growths in the market."

One participant said learning how to invest meant they even could go back and teach their parents how to invest in the stock market and manage their own portfolios. Regardless of what the investment competition participants or any teenager wants to be when he or she becomes an adult, financial literacy is a basic life skill that is more than a nice to know, it’s a need to know. And now it’s more relevant than ever.

Bev Hendry is Chairman, Americas at Aberdeen Standard Investments.

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