Valuing the Implementation of Financial Literacy Education
Davis, Kimberlee, Durband, Dorothy Bagwell, Journal of Financial Counseling and Planning
Placing a monetary value on education is a complex task. A more difficult task is to determine at what monetary level individuals will support educational improvements. The contingent valuation method was used to estimate the value of the implementation of financial literacy education in Texas public schools. A Web-based survey was administered to 279 Texas Parent Teacher Association (PTA) members. Respondents reported being willing to pay additional property taxes for implementation of financial literacy education. Additional gambling venues and state sales tax proved to be acceptable revenue sources for added educational funding, whereas a state income tax proved to be the least preferred revenue source.
Key Words: contingent valuation, financial education, financial literacy
Introduction and Background
Alan Greenspan, former Chairman of the Board of Governors of the Federal Reserve System, identified financial education programs at the elementary and secondary school levels as necessary resources for consumers to achieve financial literacy. In a speech presented during an annual meeting of the Jump$tart Coalition for Personal Financial Literacy (Jump$tart), Greenspan stated that an understanding of financial issues is critical to the successful management of personal finances and instrumental in giving consumers the tools to make educated choices about financial products. He pointed out that such knowledge was necessary to enable consumers to protect themselves from abuses stemming from fraud and other illegal practices (Jump$tart, 2003). Ben Bernanke, current Chairman of the Board of Governors of the Federal Reserve System, stated that improving financial education is vital to the future of our economy and pronounced that "financially literate consumers make the financial marketplace work better, and they are better-informed citizens" (Bernanke, 2006).
In 1997, Bernheim, Garrett, and Maki documented that financial education mandates had a positive effect on personal financial management. For instance, they reported that asset accumulation amounts increased up to 1.5% later in life for those who received high school instruction in personal finance compared to those who did not receive instruction. Despite this important finding, a national survey of financial literacy among high school seniors conducted every other year since 1997 revealed only slight increases in already low scores in financial literacy (Jump$tart, 2004, 2006). One plausible explanation for these low scores may be American high schools' increased focus on high stakes testing as mandated by the national education legislation known as "No Child Left Behind" and college preparation. Courses with practical daily applications, such as financial literacy, have received less emphasis.
The lack of attention to financial literacy education in public high schools has an impact on consumers' ability to make sound financial decisions about present and future personal needs. Yet, measuring the benefits and costs of implementing new secondary courses to the core curriculum can be difficult. A technique of economic analysis called the contingent valuation method (Mitchell & Carson, 1989) has helped researchers obtain estimates of economic value of intangible, nonmarket goods or services. In this paper, the contingent valuation method is used to establish an estimate of the economic value placed on the implementation of the financial literacy educational curriculum in Texas public schools. This is the first known attempt to value financial literacy education using this method.
Status of Financial Literacy Education
In recent years, the Congress, State legislatures, and several governors have addressed the importance of financial education in public schools. As a result, financial education during high school is required by a number of states, including Alabama, Georgia, Idaho, Illinois, Kansas, Kentucky, Louisiana, Missouri, New York, North Carolina, Ohio, South Carolina, Texas, Utah, Virginia, and West Virginia (H. …