Are you—or your spouse or your teen or your parents—among the financially illiterate?
Monday, March 30, 2015
Spring Training - Financial Literacy
Are you—or your spouse or your teen or your parents—among the financially illiterate?
For a quick answer, try this three-question quiz that two professors—Olivia S. Mitchell of the University of Pennsylvania’s Wharton School and Annamaria Lusardi of the George Washington University School of Business—have been using for years to assess individuals’ basic financial savvy.
1. Suppose you had $100 in a savings account and the interest rate was 2% per year. After five years, how much do you think you would have in the account if you left the money to grow?
A. More than $102
B. Exactly $102
C. Less than $102
2. Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After one year, how much would you be able to buy with the money in this account?
A. More than today
B. Exactly the same
C. Less than today
3. Please tell me whether this statement is true or false: “Buying a single company’s stock usually provides a safer return than a stock mutual fund.”
The correct answers are at the bottom of this section.
In a recent working paper, Ms. Mitchell and Ms. Lusardi review some of the sorry statistics on financial literacy that they and other researchers have come up with over the years—including breakdowns by education, gender, age and nationality. Among the findings:
♦ In a survey of Americans over the age of 50, only half could answer the first two of the above questions correctly. Only one-third got all three right.
♦ Forty-four percent of Americans with a college degree answered all three questions correctly. The figure was 31% for people with some college and 64% for Americans with postgraduate education.
“Even well-educated people are not necessarily savvy about money,” the professors write.
♦ In the U.S. and other countries, men are much more likely to get all three correct answers. The figure is 38% for men vs. 23% for women in this country.
But the gender variation has an additional twist, as Ms. Mitchell and Ms. Lusardi explain:
Another striking finding, also consistent across countries, is that men are more confident about their financial knowledge than they should be: even when they were wrong, they reported being ‘very confident’ about their answers. In contrast, women generally answer fewer of the financial knowledge questions correctly, on average, but they are more likely to admit when they do not know how to answer our questions. This suggests that financial education may be more welcomed by women, should the opportunity arise.
♦ Fifteen-year-olds in the U.S. ranked in the middle of the pack in a more-extensive test of financial literacy given in 18 countries by the Paris-based Organization for Economic Co-operation and Development. The top performance came from Chinese students, with 15-year-olds in countries including Australia, France and Poland also scoring higher than Americans.
Feeling confident about your responses to the three-question quiz above? This writer had two out of three.
EXTRA CREDIT: One Direction's Zayn Malik is leaving the band, temporarily ruining the lives of many teenagers across the country.
COLLEGE CHRONICLES – DECODING THE COST OF COLLEGE: College tuition is undoubtedly on the rise in many places, but using sticker price as a starting point for debates on accessibility and value is misleading - especially when those sticker prices are for, say, a Harvard or Yale. As the Education Department's National Center for Education Statistics aims to explain in a new brief today, the price of college is often lower than people think. After taking grants into account, the average full-time undergraduate in 2011-12 paid a net price of $11,700 to attend a public two-year college and $18,000 for public four-year college. Include loans, work-study and other forms of aid and the out-of-pocket costs come in at $9,900 and $11,800, respectively. That's considerably lower than the list price for tuition and other expenses, such as books, at those institutions. Undergrads at for-profit schools and four-year private colleges paid more out-of-pocket: $15,000 and $18,100, respectively. But that's still only half, or less, the listed cost of attending those institutions.
- The report also shows that dependency status and family income determine the allocation of need-based aid, and less wealthy students generally see lower costs. But that's not always the case. Dependent undergrads from low-income families on average paid more out-of-pocket to attend for-profit colleges than their peers from low-middle-income families. The report: http://1.usa.gov/1y8jnWu
- Of course, when loans are involved, the discount's not free - but repayment could be easier. The Center for American Progress is out today with its second "College for All" report, laying the groundwork for a system where students pay no tuition or fees while enrolled in public four-year institutions, and students at privates receive equivalent support. This installment focuses on student loan repayment, which CAP says must be modernized - specifically, through the creation of an income-based system that uses the IRS's wage-withholding system for automatic repayment.
POLITICS 101 - In 31 states plus [D.C.] ... Americans have voted for the same party in every single one of [the last six presidential] elections. ... With most states locked in by one party or the other, the presidential contest has largely narrowed to five states that have been consistently competitive in the past six elections: Ohio (which has long been at the 50-yard line of American politics) and four of the fastest growing states in the country-Colorado, Florida, Nevada and Virginia. ... That static map, though, is changing beneath the surface ...
In Arizona, Nevada, New Mexico, Colorado, Texas, Georgia, Florida, North Carolina and Virginia -areas traditionally associated with Republican Party strength-the population is trending younger and more diverse, and it is becoming more politically competitive for the Democrats. ... Four of the five battleground states that have been decisive in recent presidential elections-Florida, Virginia, Colorado and Nevada-all have the central attributes of 21st century America and will prove to be decisive if 2016 is a close election.
BIRTHDAYS THIS WEEK – Birthday wishes and thoughts this week to: Marcus Allen (55), Roger Bannister (86), James Caan (75), Bob Costas (63), Aretha Franklin (73), William Hurt (65), Kathy Ireland (52), Chaka Khan (62), James Lovell (87), Sarah Jessica Parker (50), Tara Pugliese …famous child prodigy, Bobby Orr (67), Diana Ross (71), Gloria Steinem (81).
MILESTONES -- Winter vaults to the top of snowfall records; Just after 7 Sunday evening, with 2.9 more inches of fresh snow blanketing Boston, the National Weather Service in Taunton announced that the city notched its snowiest winter since records started being kept in 1872. The official total at Logan International Airport reached 108.6 inches - one inch more than the previous record, which was set in the 1995-1996 winter.
Antarctica may have experienced its warmest day ever recorded on Tuesday, with the temperature reading of 63.5°F, reports The Weather Underground. Last Tuesday's record high temperature follows another high reading of 63.3°F set just the day before. Until this week's heat wave, the highest-known recorded temperature on the continent was 62.6°F back in 1976.
The Antarctic Peninsula where the readings were made "is one of the fastest warming spots on Earth," reports The Weather Undergound. The website cites studies from 2012 that show the world is warming at a quickening pace.
Five nations and territories have tied or hit all-time high temperature records so far this year.
JUST SAY NO -- Aging Baby Boomers Bring Drug Habits into Middle Age: Older adults are abusing drugs, getting arrested for drug offenses and dying from drug overdoses at increasingly higher rates. These surges have come as the 76 million baby boomers, born between 1946 and 1964, reach late middle age. ... The rate of death by accidental drug overdose for people aged 45 through 64 increased 11-fold between 1990 ... and 2010 ... The surge has pushed the accidental overdose rate for these late middle age adults higher than that of 25- to 44-year-olds for the first time. More than 12,000 boomers died of accidental drug overdoses in 2013.
RICH MAN POOR MAN -- For 2016 campaign: Out with the rich, in with the really rich: In 2016 campaign, the lament of the not quite rich enough. A couple presidential elections ago, somebody who had raised, say, $100,000 for a candidate was viewed as a fairly valuable asset,' said Washington lobbyist Kenneth Kies. 'Today, that looks like peanuts. Wealthy donors are probably looking around saying, "How can I do anything that even registers on the Richter scale?"' ...
"The VIP treatment for bundlers will ... arrive ... later in the cycle, when candidates become official and turn their focus to those who can raise money in smaller increments. Since campaign committees can accept donations up to only $2,700 per person in the primary, they will need teams of wired fundraisers who can bring in checks to fill their war chests."
ANDREW SORKIN'S NEW TV SHOW - Per Capital Media Pro: "Showtime has given a series order to drama 'Billions,' co-written by New York Times reporter and CNBC anchor Andrew Ross Sorkin. The pay-cable channel has ordered 12 episodes of the series, which stars Paul Giamatti and Damian Lewis as a U.S. attorney and a hedge fund hotshot, respectively. The series will film in New York and debut in 2016."
THE NEXT PRESIDENT? -- "Ted Cruz: I stopped listening to rock music after 9/11," by Kendall Breitman: "On 'CBS This Morning,' the Texas senator [said] he 'grew up listening to classic rock ... My music taste changed on 9/11 ... I actually intellectually find this very curious, but on 9/11, I didn't like how rock music responded. ... And country music, collectively, the way they responded, it resonated with me. ... I had an emotional reaction that said, "These are my people." ... So ever since 2001, I listen to country music.
COLLEGE HOCKEY GAME OF THE WEEK – No game this coming week, Frozen Four Thursday April 9, TD Garden Boston, Mass. – Boston University, North Dakota, Providence College, Nebraska-Omaha. Season to date (5-3)
THE SWAMI’S WEEK TOP PICKS –
(SCIAC Baseball Game of the Week, April 4) Occidental Tigers (17-9) 6 vs. University of La Verne Leopards (15-10) 7
(NBA, April 4) Golden State Warriors (60-13) 101 at Dallas Mavericks (45-29) 98
(NHL, April 4) Vancouver Canucks (43-27-5) 3 at Winnipeg Jets (39-25-12) 2
(NCAA Final Four, April 4) Michigan State Spartans (27-11) 72 vs. Duke Blue Devils (33-4) 66; Wisconsin Badgers (35-3) 75 vs. Kentucky Wildcats (38-0) 79
Season to date (31-16)
MARKET WEEK – Former Fed Chairman Ben Bernanke launched his own economics blog today. Hosted by the Brookings Institution, where he's a senior fellow, the first post is on low global interest rates.
DRIVING THE WEEK – For the first time since 1996, Tiger Woods is not among the top 100 golfers in the world ranking. He hasn't played since he withdrew from the Farmers Insurance Open on Feb. 6. It's not clear when Woods will return.
Treasury Secretary Jack Lew arrives in Beijing today for meetings with senior Chinese officials ... In the morning, the Secretary will meet with Finance Minister Lou Jiwei ... In the afternoon, Lew will meet with Vice Premier Wang Yang. ... Later in the afternoon, the Secretary will meet with Premier Li Keqiang ... President Obama is in Boston today for the dedication of the Edward M. Kennedy Institute for the United States Senate ... POLITICO's Mike Allen holds a Playbook lunch with Transportation Secretary Anthony Foxx and EPA Administrator Gina McCarthy at the Newseum in DC ... Personal income and spending today at 8:30 a.m. expected to rise 0.3 percent and 0.2 percent respectively ... Case-Shiller homes prices on Tuesday at 9:00 a.m. expected to rise 0.7 percent ... Consumer confidence at 10:00 a.m. Tuesday expected to tick up to 96.5 from 96.4 ... March jobs report at 8:30 a.m. expected to show a gain of 250K with unemployment unchanged at 5.5 percent and hourly earnings up 0.2 percent.
Release: The Edward M. Kennedy Institute for the United States Senate (EMK Institute) is honored to welcome President Barack Obama, First Lady Michelle Obama and Vice President Joe Biden at the dedication of the Institute on Monday, March 30 ... in Boston ... [Victoria Reggie Kennedy said:] The Institute will give people from all walks of life a real, hands-on feel for the vital role the Senate plays in our democracy. Combining interactive technology with a full-scale representation of the U.S. Senate Chamber, the Institute will educate and inspire the next generation of citizens and leaders. It is a distinct privilege to welcome the President, First Lady and Vice President to mark this historic occasion.
Next week: Jack Ass of the Month and the monthly Puzzler.
Until Next Monday, Adios
March 30, 2015
CARTOON OF THE WEEK – Doonesbury, G.B. Trudeau