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The financial literacy of university students

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Title:
The financial literacy of university students a comparison of graduating seniors' financial literacy and debt level
Physical Description:
Book
Language:
English
Creator:
McKenzie, Vandeen M
Publisher:
University of South Florida
Place of Publication:
Tampa, Fla
Publication Date:

Subjects

Subjects / Keywords:
Credit card usage
Debt management
Higher education
Jumpstart questionnaire
Money management
Dissertations, Academic -- Higher Education -- Doctoral -- USF   ( lcsh )
Genre:
non-fiction   ( marcgt )

Notes

Summary:
ABSTRACT: The level of university students' financial literacy has been discussed in Congress, opinion pieces in the media and the increasing level of student debt has been used to suggest their financial illiteracy. This study investigated the financial literacy of graduating university seniors by comparing their financial literacy level with their debt level. The difference in financial literacy levels of business majors, minors and non-business majors was assessed. The relationship between graduating university seniors' financial literacy level and their credit card and student loan debt was also reviewed. Gender, employment status, ethnicity, family income and college major were similarly examined to see if they were predictors of financial literacy levels and debt levels. Although financial literacy is frequently discussed in the national arena there is no clear definition of financial literacy; this ambiguity has led to multiple definitions.In this study, financial literacy was defined as "an individual's ability to obtain, understand, and evaluate the relevant information necessary to make decisions with an awareness of the likely financial consequences" (Mason & Wilson, 2000). The Jump$tart questionnaire (Mandell, 2004) was used to calculate participants' financial literacy level. The study found that the majority of the students had a high level of financial literacy with an average financial literacy score of 72.56% and with students majoring in business performing significantly better than non-business students. The use of debt level as an indicator of financial literacy level was found to be incorrect. No relationship was identified between financial literacy level and credit card debt or student loan debt. The study also found that demographic factors could not be used to predict financial literacy level and debt level.It was found that the majority of participants learned about managing money either on their own or at home from family members. More than half of the participants expressed an interest in taking a personal finance class but less than 20% were aware that this course was offered at their university. More effective methods are recommended to ensure that students become more aware such courses being offered on campus.
Thesis:
Dissertation (Ed.D.)--University of South Florida, 2009.
Bibliography:
Includes bibliographical references.
System Details:
Mode of access: World Wide Web.
System Details:
System requirements: World Wide Web browser and PDF reader.
Statement of Responsibility:
by Vandeen M. McKenzie.
General Note:
Title from PDF of title page.
General Note:
Document formatted into pages; contains 137 pages.

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University of South Florida Library
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University of South Florida
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Resource Identifier:
aleph - 002068289
oclc - 606600412
usfldc doi - E14-SFE0003123
usfldc handle - e14.3123
System ID:
SFS0027439:00001


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ABSTRACT: The level of university students' financial literacy has been discussed in Congress, opinion pieces in the media and the increasing level of student debt has been used to suggest their financial illiteracy. This study investigated the financial literacy of graduating university seniors by comparing their financial literacy level with their debt level. The difference in financial literacy levels of business majors, minors and non-business majors was assessed. The relationship between graduating university seniors' financial literacy level and their credit card and student loan debt was also reviewed. Gender, employment status, ethnicity, family income and college major were similarly examined to see if they were predictors of financial literacy levels and debt levels. Although financial literacy is frequently discussed in the national arena there is no clear definition of financial literacy; this ambiguity has led to multiple definitions.In this study, financial literacy was defined as "an individual's ability to obtain, understand, and evaluate the relevant information necessary to make decisions with an awareness of the likely financial consequences" (Mason & Wilson, 2000). The Jump$tart questionnaire (Mandell, 2004) was used to calculate participants' financial literacy level. The study found that the majority of the students had a high level of financial literacy with an average financial literacy score of 72.56% and with students majoring in business performing significantly better than non-business students. The use of debt level as an indicator of financial literacy level was found to be incorrect. No relationship was identified between financial literacy level and credit card debt or student loan debt. The study also found that demographic factors could not be used to predict financial literacy level and debt level.It was found that the majority of participants learned about managing money either on their own or at home from family members. More than half of the participants expressed an interest in taking a personal finance class but less than 20% were aware that this course was offered at their university. More effective methods are recommended to ensure that students become more aware such courses being offered on campus.
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Dedication This is dedicated to my family. Thank you!

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Acknowledgement s First I would like to thank God for giving me the strength to complete this process. It has been a journey and the Lord has taken me throug h. To my parents: Oliver and Dorna Gray thank you for y our never ending support and belief in me It certainly helped me through the rough times during this process. At times when I thought I could go no further, you were always there to reassure me. Your confidence in m y ability to complete this research even though I was working full time gave me the fortitude to continue. To my committee members: Dr. James Eison, my committee chair thank you for providing me the opportunity to work with you in the com pletion of my dissertation. I thank you for your guidance, support, encouragement and commitment. Dr. Robert Sullins, thank you for always checking on my progress. You never allowed me to pass in the hallway without checking that I was still working on my research. I thank you for your confidence in my ability to complete this research. Dr. Dominic Puglisi, thank you for the direction you gave me. You helped me formulat e my research topic and for this I thank you Dr. Jeffery Kromrey thank you for your ass istance and statistical guidance My financial aid family : Thank you for encourag ing me when I started the doctoral program for keeping me focused and help ed me to prioritize. Maggie and Dale thank you also for always being there when I needed you most

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My sister in this journey Theresa Lewis : I t was wonderful having someone to go through the doctoral process with me. We spent so many hours after work and on weekends working together on our research. Your words of wisdom always helped me through. J oan Bailey: Thank you for your constant willingness to help. C ompleting the final stages of this research while located in a foreign country was made much easier through your assistance You have been my feet on campus and I could not have completed this w ithout you. I also wish to acknowledge the students who took the time to complete my survey. Without your assistance I would not have been able to complete this research. To my friends: I wish to thank you all for your continuing encouragement and suppo rt as I completed my dissertation. My heartfelt appreciation to all of you!

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i Table of Contents List of Tables i v Abstract v Chapter 1 Introduction 1 Problem 9 Conceptual Framework 1 2 Purpose of the Study 14 Research Questions 1 4 Significance of the Study 15 Definition of Terms 1 6 Lim itations and Delimitations 1 9 Organization of Chapter 2 20 Chapter 2 Literature Review 2 1 Review of the National Strategy 2 2 Review of the State of Florida Initiative 2 5 Conceptualization of Financial Literacy 2 6 Literacy 2 6 Financial Literacy 2 7 Evidence of National Financial Illiteracy 2 8 Three Major Financial Literacy Studies of Unive rsity Students 2 9 Money Management Knowledge of University Students 30 Personal Investment Literacy of University Students 3 2 Personal Financial Literacy among University Students 3 3 Comparison 3 5 Debt Level of University Students 3 6 Financ ial Literacy of High School Students 3 9 Evaluation of Financial Literacy Surveys 40 Conclusion 4 4 Chapter 3 Method 4 5 Purpose of the Study 4 5 Participants for the Study 4 6 Instrument 4 7 Jump$tart Questionnaire Income Subscale 48 Jump$tart Questionnaire Money Management Subscale 48 Jump$tart Questionnaire Saving and Investing Subscale 49 Jump$tart Questionnaire Spending and Credit Subscale 49 Evaluation o f the Jump$tart Questionnaire 5 1 Consistency 5 1 Validity 5 3

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ii Social Bias 5 4 Data Collection 5 5 Data Management 5 7 Univariate and Bivariate Analysis 5 8 Multivariate Analysis 5 9 Research Question 1 5 9 Research Question 2 5 9 Research Question 3 60 Research Question 4 60 Chapter 4 Results 6 2 Univar iate and Bivariate Analysis 6 3 College Participation 6 3 Ethnicity 6 5 Business Major and Minor 6 6 Credit Card Balance 6 6 Student Loan Debt 6 7 Financi al Literacy Score 6 8 Multivariate Analysis 70 Research Question 1 70 Research Question 2 7 5 Research Question 3 and 4 7 6 Question 3 80 Question 4 8 2 Additional Findings 8 4 Ethnicity 8 4 Gender 8 6 Money Manageme nt Knowledge 8 7 Summary 8 8 Chapter 5 Findings, Recom mendations and Implications 8 9 Findings 8 9 Research Question 1 91 Research Question 2 9 3 Research Question 3 9 6 Research Question 4 9 9 Conclusion s 10 2 Impl ications 10 3 National 10 3 Institution 10 4 Personal Finance Associations 10 5 Students 10 6 Implication s for Future Research 10 7 Reference s 1 10 Append ices 1 20 Appendix A 2004 Jump$tart Questionnaire 1 21

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iii Appendix B Initial Email to Studen ts 1 31 Appendix C Follow up Email 1 1 32 Appendix D Follow up Email 2 1 3 3 Appendix E Thank you Email 1 3 4 Appendix F Informed Consent 1 3 5 About the Au thor End Page

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iv List of Tables Table 1 The Relationship between Federal Financial Aid and a Economic Status 1 7 Table 2 Consistency of the Jump$tart Questionnaire 5 2 Table 3 Number of Statistically Different Responses in Test Retest Reliability Evaluation of Jump$tart Questionnaire 5 3 Table 4 Participation by Co llege 6 4 Table 5 Ethnicity of the Participants 6 5 Table 6 Business Major, Minor and Non Business Distribution 6 6 Table 7 Average Credit Card Balance 6 7 Table 8 Student Loan Balance 6 8 Table 9 Financial Literacy Score Distribution 6 9 Table 10 Distribution of Business Major, Minor and Non Business Major 71 Table 11 ANOVA results for Business Major, Minor and Non Business Majors 7 2 Table 12 Distribution of Business Major, Minor and Non Business Major after Adjusting for O utliers and Extreme Values 7 3 Table 13 ANOVA results for Business Major, Minor and Non Business Majors Financial Literacy Scores after Adjusting for Outliers and Extreme Values 7 4 Table 14 Tukey Pairwise Comparison of Business Majors, Minors and Non Business Majors 7 5 Table 15 Correlation of Financial Literacy Level to Credit Card & Student Loan Debt 7 6 Table 16 Analysis of relationship between predictor variables 7 8 Table 17 Standardized Regression Coefficient 81 Table 18 S tandardized Regression Coefficient 8 3 Table 19 Mean Financial Literacy Score Distribution by Ethnicity 8 4 Table 20 ANOVA results for Ethnicity Comparison of Financial Literacy Scores 8 5 Table 21 Tukey Pairwise Comparison of Ethnicity 8 6 Ta ble 22 ANOVA results for Male and Female Financial Literacy Scores 8 7

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v Financial L iteracy and Debt Level Vandeen McKenzie A BSTRACT financial literacy has been discussed in C ongress, opinion pieces in the media and the increasing level of student debt has been used to suggest their financial il literacy This study investigated the financial literacy of graduating university seniors by comparing their financial literacy level with their debt level. The difference in financial literacy levels of business majors, minors and non business majors was assessed financial literacy level an d their credit card and student loan debt was also reviewed. Gender, employment status, ethnicity, family income and college major were similarly examined to see if they were predictors of financial literacy levels and debt levels. Although financial liter acy is frequently discussed in the national arena t here is no clear definition of financial literacy; this ambiguity has led to multiple definitions. In this study financial literacy was defined as evalu ate the relevant information necessary to make decisions with an awareness of th e ( Mason & Wilson 2000).

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vi The Jump$tart questionnaire (Mandell, 2004) was used to calculate participants financial literacy level. The study fo und that the majority of the students had a high level of financial literacy with an average financial literacy score of 72.56 % and with students majoring in business performing significantly better than non business students The use of debt level as an indicator of financial literacy level was found to be incorrect. No relationship was identified between financial literacy level and credit card debt or student loan debt The study also found that demographic factors could not be used to predict financial literacy level and debt level It was found that the majority of participants learned about managing money eit her on their own or at home from family members. More than half of the participants expressed an interest in taking a personal finance class but less than 20% were aware that th is course was offered at their university. More effective methods are recommended to ensure that st udent s become more aware such courses being offered on campus

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1 Chapter 1 Introduction As the federal government sp ending has surpassed its income over the years a similar trend can be seen in the general population A review of the federal government s spending over the past 25 years shows a steady increase in overspending ( Bureau of Economic Analysis 2006 ) In 1992 the deficit reached the then all time high of $296.7 billion. After the record high of 1992, t here was a decrease in spending until the nation had a surplus in 1998 of $90.6 billion; this was the first surplus in nineteen years. The nation enjoyed four ye ars where its spending did not exceed its income but since 2002 the United States has been experiencing record deficits. Along with overspending the federal government saving rate has also been decreasing as is evidenced in a review of the savings and inv estment tables Unfortunately, the trend of overspending and low saving transcend s the nation. A further review of the income and product accounts table along with the savings and investment tables shows that the overspending and low saving rate is not onl y at the federal level it is also seen i n local government and on the personal levels. The overspending and reduced saving trend that has transcended the nation can be ( 1977 ) ecological systems theory Bronfenbrenner postulat ed that e veryone in society is affected by changes withi n society Individuals do not develop in isolation they are affected by the interactions they have within the ir

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2 surroundings These interactions are not limited to their immediate surrounding such as their local community, local school, place of worship such as a church, synagogue or mosque peers and culture but they are also affected by national, international and global changes. As the fiscal behavior of the federal government has change d so has t he fiscal behavior of local government and the populace change d Similar fiscal changes can also be seen in the general population B etween 1990 and 2005 personal credit card debt has increased from $250 billion to $800 billion (Draut, et al, 2005) while personal savings has dropped from $299 billion to $34 billion (Bureau of Economic Analysis 2006 ) The gradual reduction in the personal savings level over the past fifteen years along with rapidly rising debt level habits. This societal adjustment has become a major cause of concern that has caught the attention of banking companies, government agencies, grass root consumer and community interest groups (Braunstein & Welch, 2002) as well as Congress. Congressional c oncern gave rise to the financial literacy component of the No Child Left Behind Act of 200 1 that requires the K 12 system to provide financial literacy education to students T he inclusion of the financial literacy component in the No Child Left Behind Ac t of 2001 shows that Congress has concern for the financial literacy of the nation by trying to affect the financial literacy level of students in the K 12 system I ronically however, t he financial literacy component of the Act was unfunded thereby limiti ng its po tential impact While t he H igher E ducation A ct of 1965 that has been reauthorized seven times since its inception none of the iteration s had a similar edict Although the Higher Education Act of 1965 did not include financial literacy directives i n 2003 Congress

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3 created and funded the Financial Literacy and Education Commission. The commission was given the mandate of developing and overseeing the implementation of a national financial literacy strategy. Although financial literacy has no offic ial definition, it has been de scribed in four recent ability to obtain, understand and evaluate the relevant information necessary to make decisions with an awareness of the lik ely financial consequences. Vitt and Anderson (2001) defined financial literacy as the ability to read, analyze, manage, and communicate about the personal financial conditions affecting material well being. It includes the ability to discern financial cho ices, discuss money and financial issues without discomfort, plan for the future and respond competently to life events affecting everyday financial decisions, including events in the general economy. Thaden and Rookey (2005) defined financial literacy as the understanding of financial facts, concepts, principles and technological tools that are fundamental to making sound financial decisions while Fox, Bartholomae and Lee (2005) defined financial literacy as concepts. For th e present study Mason and Wilson ability to obtain, understand and evaluate the relevant information necessary to make decisions with an awareness of the likely financial conseq uences, will be used. The Mason and Wilson (2000) definition of financial literacy that will be used in this study does not imply that an individual needs to be an expert in financial concepts, terminology or technology but the individual has to be able to obtain, understand and evaluate financial information.

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4 The rising personal debt level and lower personal saving rates has been commonly used as evidence of financial illiteracy in the majority of the opinion pieces that have appeared in newspapers and magazines regarding financial literacy ( Kinzie, 2007; MacDonald, 2000; Young Americans Center for Financial Education, 2007 ) Since relevant information necessary to make decisions with an awareness of the likely financial consequences (Mason & Wilson, 2000), it is i mproper to assume that poor financial decisions automatically imply poor financial literacy. Poor financial literacy or financial illiteracy relates to an individual s lack of knowledge to make or evaluate financial decisions and their inability to obtain the necessary information to assist in the financial decision making process. Mason and Wilson (2000) assert that a financially literate person can make poor financial decisions, because poor decisions can be made with a clear understanding of the consequences. Although there is a lack of a specific definition for financial literacy the importance being place d on financial literacy has not been hampered. The importance of financial literacy is evidenced in: a) Acts being passed by the federal government that established a commission that focuses on financial literacy. b) National foundations such as National Endowment for Financial Education (NEFE), National Cou n ci l of Economic Education (NCEE), Jump$tart Coalition and 360 Degrees of Financial Literacy that focus specifically on financial literacy.

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5 c) State government establishing councils to study financial literacy. d) Local commissions, foundations and associations within each state that focus on improving the financial literacy level of the population s they serve. T he se associations, coalitions, commissions, councils and foundations have been established with the primary focus of promoting financial literacy within the nation. Since a single organization is not able to impact the entire country each organization identifies a specific segment of the population and focus on impacting their financial literacy level. Recent u niversity graduates make up o ne segment of th e population that especially need to understand the impact of their financial decisions. University students have the responsibility of paying for their education which often is accomplished predominantly through grants, income from part time job, loans, both private and federal personal savings parental contribution s and scholarships S tudents who receive financial aid to assist in paying for their university education are on average offered only 49% of the cost of their education in a combination of fe deral, state and institutional grant aid ( National Center for Educational Statistics, 2006) The remainder of the cost is covered by student loans, consumer loans and credit cards. Along with paying for their education university students are commonly inu ndated with tempting credit card offers at nominal introductory rates that unfortunately balloon if balances are not paid in full ( Kara, Kaynak & Kucukemiroglu 1994; Hayhoe, Leach, Turner, Bruin & Lawrence 2000 ).

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6 Upon entering the work force university graduate s are also expected to make sound decisions regarding retirement planning. Billions of dollars have been spent b y the federal government in grants and student loan interest payment to educate the population, but students leaving university seem il l prepared to manage their limited finances ; Thaden & Rookey, 2004 ) After billions of taxpayers dollars have been spent by the federal government on higher education the taxpaying public has expectations of what the recipients of po st secondary education should be able to do and what skills they should possess (Immerwahr & Foleno, 2000). The public expect s higher education to be a value added experience for its graduates so they can lead successful lives. A financially literate gradu ate will be able to make financial decisions and be cognizant of the advantages and risks involved. The importance of university students be coming knowledge able about personal finance is increasingly being r ecognized by universit ies A n informal survey of public universities in the state of Florida regarding personal finance courses had a 60% response rate (McKenzie, 2007) and revealed that 80% of the institution s offered a personal finance course. At most universities the course was offered for credit to all major s T here was one institution that did not allow finance majors to take th is course for credit. The personal finance course was typically offered by each university between one to three times per academic year with 40 to 300 seats available. The in stitution with the lowest number of available seats per semester offered the course the least amount of times per year. The two institutions with the h ighest seat offering normally have two to three

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7 sections of the course each semester that are always full On average the semester enrollment ranged from 70 to 100 percent. The offering of the personal finance course suggests that higher education within the state of Florida recognizes the importance of all of its students be com ing knowledgeable about their p ersonal finances. During t he 12 year span of 19 87 to 1998 three scholarly studies looking at different aspects of the financial literacy of university students were published In 1987 Danes and Hira studied the money management knowledge of 323 university students at Iowa State University Although no clear definition was given for money management knowledge the authors seemingly test ed of: a) A pplying for and receiving a credit card insurance and a personal loan b) W ays of correcting erro rs relating to their credit car d, insurance and personal loan. They were also tested on the importance of financial record keeping and general financial management. T he authors found that university students were knowledgeable about financial record keep ing and basic person al loan information but they had a low level of knowledge regarding overall money management, credit cards and insurance. Danes and Hira (1987) stated that more research was needed o n the financial knowledge of college students. Volpe, Chen and Pavli cko ( 1996 ) researched the personal investment literacy of 454 university students at Young stown State University in Ohio While p ersonal inves tment literacy was not formally defined by the authors they apparently test ed f investments topics such as risk, diversification, tax planning,

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8 mutual fund performance and global investing. T hey found that university students had low personal investment knowledge but business majors were more knowledgeable than non business majors. Two years later, Chen and Volpe ( 1998 ) analyzed the personal financial literacy of 924 university students from fourteen university campuses in six states Personal financial literacy was still not formally operationalize d but based on the subscales of the survey used students were tested on their knowledge of : a) S avings and borrowing b) I nsurance c) I nvestments d) G eneral financial knowledge. The authors reported that participants had a low level of personal financial literacy Although all students had low levels of financial literacy it was observed that business majors performed significantly better on the test than other majors. Since 2000 increased interest and research has examined the financial literacy of university students with over sixteen scholarly studi es relating to the financial literacy of university students reported in the literature (e.g., Anthens, 2004; Braunstein & Welch, 2002; Godfrey, 2006; Hayhoe, 2002; Murphy, 2005; Vitt & Anderson, 2001 ) These studies have continued to report that universit y students generally have low levels o f financial literacy with business majors showing higher levels of financial literacy Past research has identified a difference in the financial literacy level of students majoring in business and non business fields (e.g., Chen & Volpe, 1998; Murphy, 2005; Volpe, Chen, & Pavlicko, 1996). Although past research has shown that there is a difference in

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9 the financial literacy levels of students majoring in business compared to non business fields, t here has however been n o research that has analyzed if a minor in business has an impact on a student s financial literacy score. Further, i ncongruence between what university students believe they should know and what they actually know was noted ( Godfrey, 2006; Norvilitis, Me rwin, Osberg, Roehling, Young, & Kamas, 2006; Thaden, & Rookey, 2005 ) For example, u niversity students believe it is important to know their credit card balance and interest rate but when tested it was found that while they were aware of their credit card balance they were typically unaware of the interest rate or how long it would take them to pay off the ir balance s ( Godfrey, 2006; Norvilitis, et al 2 006 ). Thaden and Rookey (2005) stated that further research is needed to determine whether financial lit eracy scores predict differences in tangible outcomes like credit card debt and student loan debt (p. 8). Problem Research investigating financial literacy of college and university students has been plagued with numerous problems. First there has been a lack of a clear definition for financial literacy While this had led most congressional report s newspaper article s and opinion pieces to view financial literacy as the ability to make good financial decisions the three most frequently cited studies (i. e., Chen & Volpe, 1998; Danes & Hira 1987; Volpe, Chen, Pavlicko, 1996) have not define d or described the specific elements of financial literacy being assessed The lack of a clear definition makes evaluating the findings of previous studies difficult; it also limits comparison s between

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10 recent and previous studies. In th e present study the Mason and Wilson (2000) definition relevant information necessary to make decisio ns with an awareness of the likely financial consequences, will be used. This definition will provide structure and limits to the concept of financial literacy in this study. Volpe, Chen and Pavlicko (1996), Chen and Volpe (1998) and Murphy (2005) found t hat business majors scored higher on financial literacy survey s than non business majors. Although different surveys were used in these three stud ies, the result s were consistent across investigations It is unclear from these findings the level of busines s coursework required to influence financial literacy scores While these previous studies differentiated between business majors and non business majors s tudents who took classes within the College of Business and were classified as business minors were not specifically identified. Th e proposed study further aims to clarify whether having a minor in business increases university student financial litera cy scores Therefore, the first research question of the proposed study will be: 1. What differences exist in the financial literacy levels between university seniors who graduate with a major in business, a minor in business or a major in a non business field? Research conducted by Nellie Mae (2000, 2002, 2005) and Take Charge America Institute (2007) shows that university seniors are graduating with high student loan and consumer debt levels. These studies have found that university seniors view their debt levels as excessive and burdensome. The previous studies identified that there is a problem and s tated that higher education institution s need to provide more financial

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11 education courses to increase the students financial literacy level. The studies however, The proposed in vestigation will compare university seniors financial literacy levels and their credit card and student loan debt level s to identify any relationship that may exist between their debt level and financial literacy level. Therefore, the second research of t he proposed study will be: 2. literacy level and their a) credit card debt level and b) student loan debt level? Demographic f actors have been identified in past research that has resulted in a difference in financial literacy levels. Gender, employment status, ethnicity, family income and college major ha ve be en some of the factors shown to be related to students financial literacy level (Chen, Volpe, & Pavlicko, 1996; Danes & Hi ra, 1987; Markovich & DeVaney, 1997; Murphy, 2005 and Thaden & Rookey, 2004). These factors have been identified as affecting financial literacy levels but only one factor has been studied in past research Chen and Volpe ( 2002) studied the gender differen ces in the financial literacy levels of college students They found that males had stati sti cally higher financial literacy scores than females. T he identification of factors that affect financial literacy in past research and the limited research that has studied these factors specifically has therefore led to the third and fourth questions in the proposed study : 3. To what degree does gender, employment status, ethnicity, family income and college major predict financial literacy levels of graduating uni versity seniors? 4. To what degree does gender, employment status, ethnicity, family income and college major predict the debt level s of graduating university seniors?

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12 Conceptual Framework The federal government in 2003 created the Financial Literacy a nd Education Commission through the enactment of the Financial Literacy and Education Act. The Commission was given the task of improving the financial literacy and education of persons within the United States. Though unfunded the creation of the Financi al Literacy Commission shows th at the federal government is concerned about the nation s financial literacy level. The State of Florida has also shown concern for the level of its resident s financial literacy. In 2006 the Florida legislature created the F inancial Literacy Council. The Financial Literacy Council was given the task of studying the financial problems that affect consumers and provide recommendations to assist in the development of financial literacy programs and resources that will empower in dividuals to manage their finances to reduce debt, increase savings, and avoid bankruptcy. Both the federal and state government has recognized the importance of financial literacy, but the only way for the population to become financially literate is by g aining knowledge of financial concepts and becoming aware of where to seek help when they need additional information. Hilgert and Hogarth (2003) found that financial knowledge is learned primarily from parents but Godfrey and Streeter (2002) comp i led the following national personal debt statistics : There is $1.6 trillion in personal credit outstanding. This equals $15,978.44 in possible debt per household, not including mortgage debt. Americans hold $696 billion in unpaid revolving debt. Over 2 million U. S. households seek credit counseling every year.

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13 Student loans carry the highest delinquency rate of all loans. Personal bankruptcy filing reached a record high in 2001. Approximately 1.5 million were filed in 2001 which is an increase of 19 percent over 2 000. This shows that many families are having financial difficulties and are seemingly unable to manage their finances. If parents are not financially literate and they are the primary teachers of financial knowledge it is understandable that students are not financially literate. With the federal and state government recognizing the importance of financial literacy and the primary learning source seemingly unable to impart financial knowledge it is important that the cycle of financial illiteracy be broken Parents are unable to break the cycle and unfortunately the K 12 system has been unable to break the cycle either (Mandell, 2004; National Council on Economic Education, 2007). This leaves the responsibility of breaking the cycle of financial illiteracy on higher education. Gaff and Rat cliff (1996) stated that higher education is in the knowledge generation business. Higher education is in the business of generating knowledge either through research by its scholars or the teaching done by its scholars to the students that are enrolled at the institution. Although there are different higher education philosophies the common end result of all is the attainment of knowledge by the student so that they can develop the intellect to seek new knowledge to do t heir jobs effectively and preserve the values of our culture (Ratcliff, 1996). Financial illiteracy affects the economy which impacts the stability of the nation. Higher education with its focus on knowledge

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14 generation has a responsibility for improving i would lead to greater financial literacy. Purpose of the Study This study will assess the financial literacy o f graduating seniors to identify the impact, if any that higher education has had on their levels of financ ial literacy. Nettles (1995) held that the most effective ways of influencing the direction of American public policy is to produce evidence that a crisis exists, and then rally public interest and support in addressing the matter. Through this study I aim to inform, enlighten and heighten campus awareness of the level of financial preparedness of recent university graduates from a large, state research intensive u niversity In short, I hope to generate both compelling research evidence and pose clear quest ions that will stimulate further research in the field. Research Question s 1. What differences exist in the financial literacy levels between university seniors who graduate with a major in business, a minor in business or a major in a non business field? 2. What is the relationship between graduating university literacy level and their a) credit card debt level and b) student loan debt level ?

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15 3. To w hat degree does gender, employment status, ethnicity, family income and college major predict f inancial literacy levels of graduating university seniors ? 4. To what degree does gender, employment status, ethnicity, family income and college major predict the debt level of graduating university seniors? Significance of the Study Previous studies have f ound that there were differences in the financial literacy levels of business majors but none of the past research has investigated whether students who minored in business performed any different ly from students majoring in other fields (Chen & Volpe, 199 8; Danes & Hira 1987 ; Volpe, Chen & Povlicko 1996 ) Previous research has identified the following f actors associated with students having low financial literacy a) g ender, b) e mployment s tatus, c) e thnicity, d) family income and e) college major ( e.g., Chen, Volpe, & Pavlicko, 1996; Danes & Hira, 1987; Markovich & DeVaney, 1997; Murphy, 2005 and Thaden & Rookey, 2004). This study aims to clarify the factors that impact financial literacy levels so future researchers and practitioners can use the informa tion to identify and assist students at differing financial literacy levels With the increased i nterest in the financial literacy level of university students this study will add to the body of knowledge and lead to continued research on the university st udent population by providing a reference point for future researchers

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16 Definition of Terms In this study the students financial aid will be used to determine socio economic level. At the large, state research intensive university located in the Southea stern United States, over 70% of the student population receives financial aid ( S. Runion, personal communication, August 9, 2007). There are three basic types of federal finan cial aid that are their family income. A unsubsidized Stafford loans that start accruing interest immediat ely after the loan is disbursed to the student. A middle income student can receive a combination of subsidized and unsubsidized Stafford loans as is shown in Table 1 or only subsidized Stafford loan but they are not eligible to receive any federal grant. A low income student must receive the Pell Grant and any combination of Stafford loan. With the high number of students receiving financial aid, the use of this governmental predefined assessment of family income level limits bias and reduces the need for students to include their economic status.

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17 Table 1 Economic Status Socio Economic Status Pell Grant Subsidized Stafford Loan Unsubsidized Stafford Loa n Low X X X Middle X X High X 1. Business Major: In the context of this study a student who has completed 3 0 or more credits. 2. Business Minor : In the context of this study a student who has completed 18 or more, but less than 3 0 business credits. 3. Fina ncial Literacy : relevant information necessary to make decisions with an awareness of the likely financial consequences (Mason & Wilson, 2000) 4. High Income : Students r eceiving financial aid in the form of unsubsidized Stafford loans only. 5. High Level of Financial Literacy : Earning a score of 70% or more on the Jump$tart questionnaire. A score of 70% translates to a C in most schools, and a C is viewed as a passing grade. For this questionnaire Ma ndell (2004) uses the nationally accepted value of 70% to represent a high level of financial literacy.

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18 6. Jump$tart Coalition : A national coalition of organizations dedicated to improving the financial literacy of kindergarten through university age youth b y providing advocacy, research, standards and educational resources. The Coalition developed the national standards in personal finance with benchmarks for the K 12 classroom. 7. Jump$tart Questionnaire : Developed in 1997 to evaluate high school seniors kno wledge of personal finance to determine if the students had met the national standards for personal finance The competency and proficiency level expected of the high school seniors based on the nati onal standards developed by the Coalition align with the standards developed by the National Standards for Family and Consumer Sciences Education in 1998 (Klemme, 2002). The questionnaire has four subscales, income, money management, saving and investing, and spending and credit. Respondents are expected to earn a passing grade to be viewed as which translates to a percentage value of 70. 8. Low Income : Student who is the recipient of the Pell grant. 9. Low Level of Financial Literacy : Earning a score of 50 % or less on the Jump$tart questionnaire A score of 50% or less translates to a n an uses the nationally accepted value of 50% or less to represent a low level of financial literacy

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19 10. Middle Income : Must not be a recipient of the Pell grant but must receive subsidized Stafford loans. 11. Senior : Undergraduate students who have completed 105 or more credit hours and have completed and sub mitted a graduation application. Limitations and Delimitations The questionnaire w as administered online. The link to the web based questionnaire will be sent via email students that have been identified as seniors who have completed at least 105 credit hours by the Office of the Registrar at a large, state research intensive u niversity. This study wa s being conducted at one university which is located in southeastern United States. R ecommendations made based on the survey results along with trends or p atterns identified in the results of the study must be properly understood as being limited to the institution where the research was conducted. This limits the generaliza bility of the results. After careful evaluation which is discussed further in Chapter 2 the Jump$tart questionnaire was chosen to be used for this study. The Jump$tart questionnaire only assesses the knowledge aspect of definition of financial literacy. The Jump$tart questionnaire does not allow for the evaluation of the participants aware ness of the consequences associated with making specific financial decisions. The limitation of the questionnaire limits the generalizability of the results

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20 Organization of Chapter 2 In the next chapter efforts to enhance financial literacy at the nationa l level will be review ed. After conducting extensive research online via Business, Consumer Sciences, Education and Government da financial literacy financial management financial econ omic literacy money management credit credit card knowledge debt management it was found that research relevant to the proposed study was limited Contact was made with William Becker Ph.D, th e editor for the Journal of Economic Education who expressed that limited research has been conducted and published on the financial literacy of college students. The available research though limited, will be reviewed in Chapter 2. T he conceptual ization of financial literacy will be discussed along w ith the evidence of financial illiteracy across the nation The three major works regarding the financial literacy of university students will be detailed. The financial literacy of high school students will also be reviewed, to understand the financial li teracy level of incoming university students. Unfortunately few studies have been conducted on the financial literacy of university students, however their debt level which is used as an indicator of financial illiteracy has been studied and will be review ed and summarized in chapter two.

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21 Chapter 2 Lit erature Review As the financial landscape changes and the populations economic safety net erode, employees have to be financially savvy to be able to wisely manage their finances to reduce financial inse curities (Center for Responsible Lending & Demos 2005). Workers are now responsible for managing their retirement accounts, the future availability of social services are unsure and health insurance benefits are no longer guaranteed with employment (Cente r for Responsible Lending & Demos 2005; Braunstein &Welch, 2002; Chen &Volpe, 1998). With these social and societal changes, the financial arena gets harder to navigate. It is imperative that everyone, including university students know how to manage the ir finances. After four years of post secondary education, upon entering the working environment, graduates are expected to make decisions regarding their financial future. Th ese trends and issues demonstrate the importance of being a financially literate university graduate. Mandell (200 4 ) in his study of graduating high school seniors found that high school seniors typically are not financially literate, their overall average score and the average score of each subscale was less than 70%. Mandell (200 4 ) further pointed out that high school seniors financial literacy level ha d declined over time. H igh school senior graduat e high school and enter university having the same financial literacy level they had upon graduation If these students are not intro duced to financial literacy

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22 education while in university they will ultimately become financially illiterate college graduates This puts the onus on higher education to break the cycle of financial illiteracy. Higher education is viewed by the public as an envi ronment that prepares students to be fully functioning and productive members of society. The public expects university graduates to develop maturity, organizational skills, self direction, self discipline, critical thinking skills, problem solving skills and the ability to manage on their own (Immerwahr, 2000). and incorporate their personal and financial lives. As a nation, if we do not prepare our most educated members to fully participate in society then the nation become s a part of the problem. The federal government recognizing that there was a financial literacy problem based on the mounting evidence of bankruptcies, high level s of revolving debt and low saving rate s created the Financial Literacy and Education Commission. The Commission was a mandate of the Financial Literacy and Education Act, which is Title V of the Fair and Accurate Credit Transaction Act of 2003. The Commission was charged with developing and overseeing the implementa tion of a national financial literacy strategy. Review of the National Strategy Anticipating that there was a problem with the national financial literacy level in 2003 the federal government enacted the Financial Literacy and Education Act The Financi al Literacy and Education Act created the Financial Literacy and Education

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23 Commission with the Department of Treasury assigned the task of being the chair of the C ommission. The C ommission was given the responsibility of improving the financial literacy an d education of persons within the United States. The C ommission was responsible for the financial literacy and education of persons of all ages within the United States, includ ing university students The C ommission was given 18 months to develop and coor dinate the federal effort to implement the all encompassing national strategy. In April 2006 the commission published the national strategy which was ten months after the designated timeframe allowed by the Financial Literacy and Education Act. While t he strategy identifies strategic areas needed to improve financial literacy nationally it sets no clear goals or objectives for what it seeks to achieve n or performance measures for assessing progress. The strategy also addresses the types of resources that are available from different sectors including federal, state, community and private organizations. Anyone in the process of developing a financial literacy program could indirectly use the national strategy to identify the group that is in the greatest ne ed that is focused on young adults specifically university students it could be interpreted that university students are in the greatest need of financial literacy e ducation The C ommission has decided to focus its pilot campaign on young adults because a credit survey conducted by the Financial Markets and Community Investment office found that younger consumers had significantly less knowledge of credit reporting is sues thus, the

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24 Commission decided to focus its pilot campaign on university students ( U.S. General Accounting Office 2006). One of the limitation s of the national strategy that is also seen in studies on financial literacy is the lack of a n explicit and c onsensual definition While t he financial areas that the C ommission was charged with focus ing on are clearly stated in the Act, with out a clear definition of financial literacy the true impact of the C ommission can not be readily assessed Another limitation of the national strategy is the manner in which financial literacy programs offered by governmental organizations w ere evaluated for overlap. U.S. General Accounting Office (2006) stated that the Commission had the federal agencies evaluate thei r programs and they reported that their programs did not overlap. This lack of transparency affects the legitimacy of results from the evaluation since the Commission is comprised of the federal financial agencies that made the decision to evaluate their o wn programs (U.S. General Accounting Office, 2006) The Financial Literacy and Education Act was clear in the designated role of the Commission. The Commission was required to develop a national strategy and coordinate the national implementation. Based on the strategy that was presented ten months after it was required, the Commission has not met its goal. The Commission has summarized the present financial state of the population and programs that are being offered by different entities to assist in curta iling the problem. The Commission had not specified a specific strategy that will be implemented a population that is most in need of financial literacy training nor has a timeline been developed for implementing a strategy Indirectly the Commission has stated that university students are most in need since the

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25 pilot campaign will be directed towards that population. Clear goals by which to evaluate the strategy are also lacking. Review of the State of Florida Initiative During the 2006 legislative yea r the State of Florida enacted the Florida Financial Literacy Council in HB 825. The Council is an adjunct to the department of financial services. HB 825 enacted the Council which will cease to exist on December 31, 2011 with the purpose of Studying the financial problems that affect consumers, particularly small businesses, young people, working adults, and seniors that arise from a lack of basic knowledge of financial issues and to provide recommendations to the Department of Financial Services which wi ll assist the department in developing financial literacy programs and resources and providing a single state resource for financial literacy for the general public in order to empower individuals and businesses to manage their financial matters in order t o reduce debt, increase savings, and avoid bankruptcy (p. 2). The Council has been given the responsibility of identifying the financial problems affecting the entire population of the state although the legislature has identified the population they bel ieve to be most at risk. Unlike the Financial Literacy and Education Commission, t he Council has been told to focus on small business, young people, working adults and seniors. This seems like a daunting task since they only have five years within which to accomplish this task. The State of Florida appropriated $50,000 in nonrecurring funds to the Council. Although the state initiative has been funded though the funding is limited the funding has a stipulation that limit s the

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26 Council s ability to use the funds. T he Council can use the funds only if the y receive grant funds or contributions equal to or greater than the appropriated funds. Conceptualization of Financial Literacy Literacy To fully understand and appreciate the concept of financial literacy a full understanding of the meaning of the word literacy is necessary. Literacy as defined by the Oxford English Dictionary is the quality or state of being literate; knowledge of letters; condition in respect to education especially the ability to rea d and write. The Merriam Webster definition of literacy is the quality or state of being literate. Both the Oxford English Dictionary and Merriam Webster defined literacy as the quality or state of being literate but what does it mean to be literate ? Oxford English Dictionary defined literate as acquainted with letters or literature; educated, instructed, learned; of or pertaining to letters, literary men or literature; a liberally educated or learned person; one who can read and write. Merriam Webs ter defines literate as educated, cultured; able to read and write; versed in literature or creative writing; lucid, polished; having knowledge or competence. The preponderance of the emphasis on language in definitions is understandable given the origin s of the word literacy. The word literacy was derived in 1886 from the word literate. Literate is the current evolution of the 1432 word literat which was derived from the Latin word litterae which means letters or literature. It is now being recognized th at literacy is not limited to language. Knowledge of a particular subject or a particular

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27 type of knowledge and having knowledge or competence as defined by Cambridge Dictionaries Online and Merriam Webster respectively and the state of being educated, ins tructed or learned as defined by Oxford English Dictionary recognizes the evolution in the use of the word literate. Financial Literacy words literate, knowledge and competence reve als that proficiency, resourcefulness and skilled create a theme for synonyms. A person proficient in a skill area is able to understand and evaluate issues pertaining to the skill area while being aware of the potential consequences. A resourceful perso n is aware of when they lack the necessary knowledge to make informed decision and they have the forethought to obtain the information to ensure that the best possible decision is made. Mason and Wilson (2000) defined financial literacy as s ability to obtain, understand and evaluate the relevant information necessary to make decisions with an awareness of the likely financial consequence This shows that being proficient, skilled and knowledgeable in financial manners and being able to mak e decisions with an understanding of the ir consequences shows your level of financial literacy. Being financially literate is not limited to persons who are proficient and knowledgeable. The resourceful person who is aware of their limitation in certain fi nancial matters but is able to find the appropriate sources to gain the necessary knowledge to be able to make an informed decision is also financially literate. Mason and Wilson (2000) made it clear that

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28 being financially literate does not guarantee that a person will make sound financial decisions, once a person is aware of the consequences of their financial decisions and choices they are financially literate even if the consequence will be negative. Evidence of National Financial Illiteracy Hilgert and Hogarth (200 3 ) and Mandell (200 4 ) found that most students learned their financial practices and habits from their parents or through personal experience Mandell (2004) identified this trend in his national study conducted in 1997, 2000, 2002 and 2004 o n a total of 10,353 high school students Hilgert and Hogarth (2003) in their analysis of the national survey of 1004 consumers across the contiguous United States also found that people primarily learned their financial practices and habits from their fam ily or through personal experience. Mandell (2004) show ed that s tudents are learning financial practices from their parents and the parents have learned their financial practices from their parents (Hilgert & Hogarth, 2003). This implies that parents nee d to be financially literate to be able to teach their children positive financial behavior and habits. Interested groups such as financial institution s credit counseling agencies and policymakers are concerned that consumers lack a working knowledge of financial concepts and do not have the tools they need to make decisions most advantageous to their economic well being (Braunstein & Welch, 2002; Hopley 2003). In a speech given by Roger W. Ferguson, Jr. Vice Chairman of the Federal Reserve before the N ational Council on Economic Education (2002), he stated that changes in our financial system

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29 including the increasing complexity and diversity of product offerings have created consumer demand for improved education. With educators and students living in t his diverse and complex economic environment (Klemme, 2002) the need for increased financial education is necessary. Stephen Brobeck (2002) Executive Director of Consumer Federation of America stated in testimony before the Committee on Banking, Housing, a nd Urban Affair s of the United States Senate, that the recent changes in the financial services marketplace have increased the financial vulnerability of households. The financial literacy crisis that is looming in the United States (Anthes, 2004) is count erproductive to the financial direction of the economy that places more responsibility on individuals to manage their own finances. With a more diverse and complex economic environment and the projected crisis that is looming more training is required for the population to be able to effectively navigate the system. We live in the largest capitalist nation in the world and our children graduate from high school without a clue about finances (Godfrey & Streeter, 2002; Godfrey, 2006 ). The expectation of a capitalist society is that the population will be increasing their wealth. The unfortunate reality is that the population is increasing their debt. Three Major Financial Literacy Studies of University Students There have been three major scholarly studie s on the financial literacy of university students e ach look ing at a different aspect of financial literacy. The first study was conducted by Danes and Hira in 1987 to examine the money management knowledge of university students. Volpe, Chen and Pavlick o (1996) next researched the

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30 personal investment literacy of university students. Two years later in 1998 Chen and Volpe analyzed the personal financial literacy of university students. These three ground breaking studies will be reviewed in detail. Mone y Management Knowledge of University Students Danes and Hira (1987) studied the money management knowledge of university students by survey ing 716 students at Iowa State University a total of 323 (45.11%) responded to the survey questions. The survey consi sted of 51 questions that w ere divided into the five sub scales of credit cards, insurance, personal loans, record keeping and overall financial management (p. 4) The credit card subscale consisted of eight questions, the insurance subscale consisted of s ix questions, the personal loan subscale consisted of thirteen questions, the record keeping subscale consisted of six questions and the overall financial knowledge subscale consisted of eighteen questions. Psychometric data about the survey instrument was not reported. The demographics of the sample were representative of the university population from which the respondents were drawn. knowledge level a) s tudents who scor ed 80 99 percent were described as having a high level of knowledge, b) students who scored 60 79 percent were described as having a medium level of knowledge, c) student who scored 40 59 percent were described as having a low level of knowledge,

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31 d) studen ts who scored 20 39 percent were described as having a very low level of knowledge. Danes and Hira (1987) found that students were knowledg eable regarding the general use of credit cards as a form of identification and the additional costs associated wi th late payments R espondents knowledge level decreased when interest charges and problems that might arise in using credit cards were addressed. S tudents were aware of the importance of medical insurance but their knowledge level regarding disability inc ome insurance, life insurance, the provisions of auto collision insurance and the rate of return on cash value life insurance were low to very low (p. 8). Q uestions relating to basic knowledge regarding personal loans showed a high knowledge level but spec ific questions on balloon payments, credit life insurance and cost comparisons showed a lower level of knowledge. Students showed medium to high levels of knowledge regarding the importance of record keeping. O n the basic questions of each subcategory the respondents showed some knowledge but showed evidence of lower knowledge level on more specific questions relating to the subcategories e.g., the students knew the importance of knowing the total amount to be paid on a personal loan and the number of paym ents required but few students knew the importance of the prime interest rate on determining the interest rate of a personal loan The researchers identified incongruence between what the student s sa id they should know and what they actually kn e w. Eighty s even percent of the respondents stated that it was important to know the Annual Percentage Rate (APR) when applying for a loan, but only 38% knew the APR on their charge accounts. Also identified was a

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32 difference in the money management knowledge level of university seniors and freshmen. The authors found that university seniors had greater knowledge than university freshmen. Although university students showed that they were knowledgeable on some of the subscales when their overall financial knowledge was assessed the researcher found that their knowledge level was low. Personal Investment Literacy of University Students Volpe, Chen and Pavlicko (1996) researched the personal investment knowledge of 454 university students at Youngstown State University in Ohio as it relates to gender, academic discipline and experience. Th e i r study focused exclusively on the investment subcategory of financial literacy. Unfortunately t he researchers used the ten item Forecast issue of the 1993 Money magazine along with some additional demographic questions. Each of the ten items tested a separate subscale of investment. The use of an instrument with few items limits a researcher s ability to derive significant conclus ions. Participants had to score a 70 or higher on the survey to be viewed a s knowledgeable. R esults show ed that illiteracy is spread across a broad range of topics on personal investment (p. 88). R esults revealed that the personal investment knowledge of t he university students was inadequate with participants having an average score of 44 M ale participants performed better than the females with a chi squared result of 5.31 at a 0.05 significance level As the researchers expected business majors had a hi gher level of personal investment knowledge than non business majors. It must be noted however, that

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33 that 70% of the participants were business majors. The researchers went further and compared the results of finance and accounting majors with those of mar keting and management majors. They found that finance and accounting majors had a higher level of personal investment knowledge. The researchers found that students who had prior experience inve s ting in stocks, bonds or mutual funds showed no difference in their personal investment knowledge than students without prior experience The researchers stated that inadequate knowledge of personal investment cuts across the entire student body with women and non business majors earn ing the lowest scores (p. 92). T hough t he authors did not cite the limited number of non business participants ( N = 30%) as a limitation to their study, a more balanced academic sample along with a more detailed survey is needed to produce rich and representative findings about the pers Personal Financial Literacy among University Students In 1998 Chen and Volpe investigated the personal financial literacy of 924 university students from fourteen college campuses in six differen t states The colleges ranged from small two year institution s to large four year institution s both public and private. The researcher had three goals, a) to provide evidence of personal financial literacy among university students, b) to examine why some unive rsity students are relatively more knowledgeable than others and to

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34 c) decisions on personal financial issues. Although no explicit definition was given for financial literacy t he 52 item Survey of Personal Financial Literacy created by the authors consisted of t hirty six questions that a) savings, b) borrowing c) insurance d) investments e) general financial knowledge. Eight questions gathered information eight questions gathered demographic data. A percentage score of 80 or above showed a high level of financial literacy, a score from 60% to 79% showed medium level of financial literacy and a score below 60% showed a low level of financial literacy. No psychometric data was reported for this instrument so the validity or reliability of the instrument could not be determined. Chen and Volpe (1998) found that university finance w as inadequate with a mean score of 52.87% They attributed this to the lack of a sound personal finance education in the university curricula. Business majors performed significantly better and showed a higher level of personal financial literacy than non business majors. Although the overall results indicated that the students had a relatively low level of financial litera cy Chen and Volpe (1998) pointed out that class rank had an

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35 impact on participants performance. Graduate students performed significan tly better than undergraduates and juniors and seniors performed significantly better than freshmen and s ophomore. They also found that male participants performed significantly better than females. The researchers warned that the challenging issue of fina ncial illiteracy needs to be addressed because when an individual cannot manage their finances it becomes a problem for society. Comparison The two earlie st studies by Danes and Hira (1987) and Volpe, Chen and Pavlicko (1996) money m anagement knowledge and personal investment literacy. Money management and personal investments are two sub components of the larger construct of financial literacy. Only Chen and Volpe (1998) looked specifically on the financial literacy of university stud ents. Unfortunately, s imilar to the Financial Literacy and Education Act Chen and Volpe (1998) did not provide a definition for financial literacy. Although financial literacy was not defined in their study they outlined that the ir survey instrument woul d evaluate a) savings and borrowing, b) insurance, c) investments d) general financial knowledge Volpe, Chen and Pavlicko (1996) and Chen and Volpe (1998) both identified that b usiness majors perform better on financial literacy surveys than non business majors.

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36 The reason that business majors perform better on financial literacy surveys has not been tested but it has been surmised that business majors have been exposed to more financial issues and they are more interested in reading and learning financial relate d material (Volpe, Chen & Pavlicko, 1996; Chen and Volpe, 1998). Chen and Volpe (1998) stated that without adequate knowledge students are more likely to make mistakes in the real world (p. 122). The present trend of a negative saving rate, increased bankr uptcy filings and skyrocketing revolving debt rate shows the mistakes that are being made by the general population. The behavior and trends seen in the general population can not be directly attributed to the university population. Although the university population is a microcosm of the general population there is one major difference between the university population and the general population. The university population consists of people at similar education level. Although Volpe, Chen and Pavlicko, (1 996) results align with the other studies on financial literacy, the questionnaire used had one item for each sub category being tested. Danes and Hira (1988) and Chen and Volpe (1998) used surveys that consisted of over 50 questions with multiple question s being used to test a particular sub category. Debt L evel of University St udents Danes and Hira (1988), Volpe, Chen & Pavlicko (1996), and Chen and Volpe (1998) found that university students lack knowledge regarding money management, investment and per sonal finance. After graduating from university where they have been prepared to be productive citizens, these students are expected to manage their finances

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37 effectively to be able to meet their living expenses, service debts incurred while in university manage their retirement planning, save towards the purchase of a home, the education of their children and unexpected financial emergencies. Without some knowledge or the knowledge of where to seek the information recent university graduates will be making financial decisions without the necessary information to make informed decision. University students typically fac e two major debt issues upon graduation, student loan debt and credit card debt. New York Senator Schumer pointed out in his 2004 press re lease that New York university students are carrying $1.9 billion in credit card debt. He reiterated the findings of the Nellie Mae study (200 0 ) by stat ing that on average students start university with one or no credit cards and graduate with four or mo re, and one third of the graduating students are carrying balances between $3,000 to $7,000 and they are having difficulty servicing their debts Credit card debt alone is not a problem but along with student loan debts students are experiencing excessiv e financial burden The traditional student loan repayment term spans ten years but this can be extended through consolidation. A July 2006 article written by Anya Sostek in the Pittsburgh Post brought to light the fact that students were opting for longer student loan repayment terms to ease the repayment burden. She identified that some students were opting for 25 and 30 year repayment options. Extending the student loan repayment period does ease the initial financial burden of loan repayment but the ext ended period significantly increases the total amount of interest the student pays over the life of the loan.

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38 The lack of university financial aid administrators. In a 2002 statement before Congr ess, Senator Sarbanes reiterated his increasing concern with the lack of financial literacy, especially credit card usage among university students. He noted that it should come as no surprise that many students build up significant credit card debt withou t fully comprehending the consequences. All of the speakers agreed that the lack of financial knowledge among university students often leads to a large debt burden that can further complicate the the testimony, Senator Akaka stated that financial literacy among all Americans not just university students needs improvement. t s by significantly expanding credit available to consumers an d by marketing credit aggressively (Brobeck, 2002). It is not uncommon for university students even those lacking a job or other source of income to obtain a credit card (Braunstein & Welch, 2002). These students have no way of repaying this easily atta ined debt immediately and sometimes graduate with significant consumer debt. In a 2001 study by the U.S. General Accounting Office, more than 33 percent of surveyed students indicated that they ha d a credit card before they entered university and another 46 percent had acquired a card in their freshman year of university In the same study evidence was also provided that the younger population is having difficulty managing debt. The nine year span between 1991 and 1999 the bankruptcy filings for debtors un der the age of twenty five had increased by 51 percent.

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39 Financial Literacy of High School Students National standards have been developed for the teaching of consumer education under which personal finance falls. Although these standards have been deve loped the Jump$tart survey suggest s that students are leaving high schools without adequate basic personal finance skills (Mandell, 1998). Although students whose parents were considered as having a high income performed better on the questionnaire over all the results showed that the students had inadequate knowledge of basic personal finance. With the increased availability of credit and the increasing levels of predatory lending, the potential to make uninformed financial decisions are increased. The Jump$tart survey developed by Mandell has been administered to over 10,000 high school seniors. With a score of 70% viewed as evidence of financial literacy, the results over the years has shown that the students have a low level of financial literacy. The score of 70% was used because of its national acceptance as being the minimum percentage grade required for a student to receiv e a passing grade. In 1997 the average score was 57.3%, in 2000 the average score was 51.9%, in 2002 the average score was 50.2% and in 2004 the average score was 52.3% (Mandell, 2004). In an address in 2004 to teachers and school administrators in Madison Wisconsin, Deputy Assistant Treasury Secretary for Financial Education Dan Iannicola, Jr. stated that our students need to b e taught the basics of saving, budgeting and managing credit in order to make informed decisions on how to pay for university finance a home or start a small business. He also reiterated that a solid financial

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40 education is vital for our young people if th opportunities. Evaluation of Financial Literacy Surveys The federal government was the first entity to develop a survey that captures the trends in financial behavior and knowledge of households The Survey of Financia l Characteristics of Consumers was the initial survey was administered by the government in 1962 (Federal Reserve Board) The survey was enhanced and renamed the Survey of Changes in Family Finances and administered in 1963. These two surveys are the direc t precursors of the Survey of Consumer Finances that is presently being used by the federal government. The Survey of Consumer Finances was first administered in 1983 and had been administered triennially since. The federal government tracks national trend s in financial knowledge and behavior by using this in depth survey that requires true or false and yes or no responses. The survey consists of 286 question of which 42 are demographic questions. Danes and Hira (1987) developed a 51 item survey that was administered to students at Iowa State University. The reliability of the questionnaire was .76 which is the Cro Reliability procedure in SPSSX (p.5). An independent assessment was done by three faculty members of the Depart ment of Family Environment at Iowa State University with expertise in financial management to ensure the validity of the instrument (p.5). The survey had five subscales, credit card knowledge, insurance knowledge, personal loans knowledge, record keeping k nowledge and overall

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41 financial management knowledge (p.5). Each subscale had between eight and thirteen questions. This survey was used to assess the financial management knowledge of 323 students at one university in the Midwestern United States. Limited psychometric data is available for this survey and there has been no independent assessment of the instrument. In their 1996 research Volpe, Chen and Pavlicko used the I nvesting questionnaire that was printed in the special 1 993 Money Fo recast issue of Money magazine. The questionnaire consisted of ten items with the magazine claiming that each item test ed a separate subscale. The limited number of items and one item per subscale limits the researcher s ability to make inferences or signi ficant conclusions from the results. T he Jump$tart Coalition of Personal Financial Literacy conducted its first survey of high school seniors using t he 1997 Jump$tart Questionnaire developed by Mandell The questionnaire was reviewed by members of the coa lition which is comprise d of personal finance experts and personal finance educators. The q uestionnaire is a 52 item survey. 31 multiple choice mini case item s that subscales that are accessed to test a income, money management, saving and inves ting, and spending and credit. Part two consists of demographic and financial behavior questions. The questionnaire has been administered t o over 10,000 high school students nationally during it bi annual administration over the past ten years. Indep endent research (Lucey, 2005) has since determined a moderately high level of internal consistency for the overall survey. The questionnaire has also been used by other researchers (Thaden & Rookey,

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42 2008) and has been used by the Federal Reserve as a model for a financial literacy survey (Hilgert & Hogarth, 2003). Thaden and Rookey in 2004 used the Financial Literacy Project Survey that was pattern ed after the Jump$tart survey. The second part of the survey was a replication of the evaluation portion of the Jump$tart survey. The first part of the survey collected demographic and personal financial habit information that was modified from the origina l used in the Jump$tart survey to reflect the university population. They separated one of the Jump$tart survey demographic questions and added subsections to two. They also added five additional questions to the demographic and personal financial habit se ction. The test was administered to 1,231 students at Washington State University. Chen and Volpe (1 998 ) designed the Survey of Personal Financial Literacy for use in their research The survey consisted on 52 questions. Thirty six multiple choice questio savings and borrowing, insurance, investments and general knowledge. There were eight demographic information. A pilot test was used to refine the test T he validity and clarity was evaluated by two personal finance experts and the quality and consistency was A review of the test shows that each subscale contained analytical skills to answer the questions. Limited psychometric data is available for this survey and there has been no independent assessment of the instrument.

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43 In 2005, Murph y developed and used a ten item survey to assess the financial literacy of students at Florida A&M University. The author developed the survey based on the content of the financial literacy module covered in a specific management course at Florida A&M Univ ersity. The topics covered in the financial literacy module are income taxes, credit cosigning, short term savings, investing for retirement, social security, future university costs and home ownership. The limited number of items limits the inference that can be made from the results received and the author advised future researchers to use surveys with multiple items to measure subscales. Avard, Manton, English and Walker in their 2005 study used the Personal Finance Questionnaire that was developed by fo ur College of Business professors at Texas A&M University Commerce. The Personal Finance Questionnaire consist ed of a twenty item multiple choice questionnaire that evaluate s participants basic knowledge of financial issues and three demographic questions A review of the questionnaire showed s The test had one situational question. The test was administered to 407 participants who were all enrolled in the 2003 freshman English class at Texas A&M University Commerce. In conclusion, f or the proposed study the 2004 Jump$tart Questionnaire will be enhanced and used. The test portion of the questionnaire will remain in its original format but the demographic section will be enhanced to reflect the university student population. The instrument has been used five times by the Jump$tart Coalition to assess the financial literacy level of graduating high school seniors. The survey has been

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44 administered to over 10,000 high school seniors since it was developed. Other surveys have been patterned off the Jump$tart survey and have been administered to over 2,000 participants. The multiple times the Jump$tart survey has been used along with the number of number of items and the subcate gories makes the survey the best choice for testing the financial literacy of university students. Conclusion Ferguson (2002) noted that financial literacy can keep people from making uninformed decisions but it cannot keep them from making bad decision s. In no way are the downward spiral of the personal financial knowledge and competence of the public. People will have the tools needed to be able to make informed decisions but the making process. University students have become the target of the credit card marketers and with the limited focus being put on personal finance by universities (D anes & Hira, 1987), it is understandable why students end up in severe financial crises (Braunstein & Welch, 2002) without being aware of how it happened. Chen and Volpe (1998) best surmised the issue in stating that findings suggest that university studen finance is inadequate.

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45 Chapter 3 Method Purpose of the Study This study examined the financial literacy of university students. Whereas a literacy that occurs between their freshman to senior year is not feasible at present, a associated with university seniors financial literacy levels. Based on prior research, this study was designed to investigate the following questions: 1. What differences exist in the financial literacy levels between university seniors who graduate with a major in business, a minor in business or a major in a non business field? 2. Wha literacy level and their a) credit card debt level and b) student loan debt level? 3. To what degree does gender, employment status, ethnicity, family income and college major predict fina ncial literacy levels of graduating university seniors? 4. To what degree does gender, employment status, ethnicity, family income and college major predict the debt level of graduating university seniors?

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46 Participants for Study The participants were senior s who were enrolled at a large, public, state research intensive university located in the Southeastern United States had attempted at least 105 credit hours and had applied for graduation during the summer term of the 2007 2008 academic ye ar. University policy stipulated that students must complete the minimum of allow ed students to apply for graduation two semesters prior to their expected graduation date. Limiting the participants to students who had completed 105 credit hours and ha d applied for graduation ensured that the participants in the study we re graduating seniors. The und ergraduate student body consisted of 59.3% females and 40.7% males with an ethnic composi tion of 11.5% African American, 0.5% American Indian, 5.6% Asian, 69.8% Caucasian, 10.1% Hispanic, and 2.5% Non Resident Alien based on 2003 2004 informati on which wa s the most recent published data available (2003 2004 Fact Book). The undergraduate gradu ating class on the main campus consisted of 1357 students. Graduating students were enrolled in their final semester and at the end of the semester met the minimum requirement of 120 credit hours to earn an undergraduate degree. Although the selected unive rsity ha d several branch campuses, the participants were recruited and selected from the main campus. Doing so allow ed for a greater possibility that students had a similar undergraduate experience. For example they had similar courses from which to choos e and were able to be involved in similar on campus non academic activities.

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47 Instrument The Jump$tart Questionnaire of Financial Literacy was administered to participants using the Tailored Design Method (Dillman, 2000). The Jump$tart Questionnaire was cho sen for the following reasons, a) the number of times it ha d been administered nationally b) the availability of psychometric information c) its alignment with the National Standards for Family and Consumer Sciences Education. d) the alignment of the instrument with t he Mason and Wilson (2000) definition of financial literacy. The following additional information about the Jump$tart Questionnaire elaborates on this information. Permission for use of the questionnaire was received from the creator of the Jump$tart Quest ionnaire. It was originally developed in 1997 by Lewis Mandell, Ph.D. an economics professor at the State University of New York (SUNY), Buffalo, to test the financial literacy of high school seniors for the Washington D.C. based nonprofit organization Jum p$tart Coalition of Personal Financial Literacy (Mandell, 2004). The coalition is an umbrella organization for corporations, government agencies, foundations and others dedicated to improving financial literacy throughout the United States (Breitbard & Rey nolds, 2003). Each time the survey was administered nationally by the Jump$tart Coalition (i.e., in 1997, 2000, 2002, 2004 and 2006) it was administered to over 1100 participants nationwide. Other researchers have patterned their instruments after the Jump $tart Questionnaire (Thaden & Rookey, 2004).

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48 The 2004 Jump$tart Questionnaire (see Appendix A) is a two part questionnaire. In the original questionnaire the first part consisted of thirty one mini case questions relating to personal finance with multiple choice responses. The number of correct responses to the mini Example of the mini case questions are: 1 Rebecca has a good job on the production line of a factory in her home town. During t he past year or two, the state in which Rebecca lives has been raising taxes on its businesses to the point where they are much higher than in neighboring states. What effect is this likely to have on 2 Jim just found a job with a take home pay of $1,500 per month. He must pay $750 for rent and $125 for groceries each month. He also spends $100 per month on transportation. If he budgets $50 each month for clothing, $75 for restaurants and $50 for everything else, how long will it take him t o accumulate savings of $700? The second part gathered demographic and social information such as gender, ethnicity, grade level, family income and educational level, employment history and information on financial behavior. The content of the instrument was developed and used to test the competency of high school seniors in consumer education and financial management. The competency and proficiency level expected of the high school seniors align with the standards developed by the National Standards for F amily and Consumer Sciences Education in 1998 (Klemme, 2002). Although university seniors and high school seniors are not a comparative group, the Jump$tart Questionnaire which is one of the most widely used financial literacy surveys, will be used. The su rvey has psychometric data available and it has been used in the past by another researcher to evaluate the financial literacy of college students (Thaden & Rookey, 2004).

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49 For this study the demographic questions w ere modified to reflect the university st udent population and questions that were not pertinent to the study were eliminated. Additional questions were added to the demographic section to allow for the differentiation of business majors, minors and non business majors, income levels and debt leve ls. For this study the demographic portion of the survey was first and the evaluation portion was second. Couper, Traugott and Lamias (2001) and Dillman (2000) pointed out the importance of web based survey design. Dillman (2000) advised that demographic i nformation which is viewed as non threatening should be first on a survey. This will improve the participants comfort level and increase the probability that they will complete the survey (Dillman, 2000). The Jump$tart questionnaire has four subscales whi knowledge of income, money management, savings and investments, and spending and credit. Jump$tart Questionnaire Income Subscale This subscale is comprised of seven questions income, analyze how career choice, education, skills, and economic conditions affect income and how taxes, government transfer payments and employee benefits relate to disposable income (Jump$tart Coalition of Personal Finance, 2002). The income subscale is evaluated using item s 23, 27, 32, 34, 35, 37, and 42 (Jump$tart Coalition of Personal Finance, 2002).

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50 Jump$tart Questionnaire Money Management Subscal e The questionnaire has five cost of financial decisions, how limited personal financial resources affect the choices people make and the importance of taking responsibility for personal financial decisions. It also tests their ability to plan for earning, spending, saving, and inves ting. It also tests their knowledge of money management tools available at financial institutions, the effect of inflation on spending and investing decisions, and how insurance and other risk management strategies protect against financial loss (Jump$tart Coalition of Personal Finance, 2002). The money management subscale is evaluated using item s 21, 26, 40, 48, and 51 (Jump$tart Coalition of Personal Finance, 2002). Jump$tart Questionnaire Saving and Investing Subscale This subscale has eight questions. between saving and investing, how to buy and sell investment, and the risk, return and tha t affect the rate of return of investments, sources of investment information, and how investors are protected is also tested (Jump$tart Coalition of Personal Finance, 2002). The saving and investing subscale is evaluated using item s 22, 25, 28, 33, 36, 45 46, and 47 (Jump$tart Coalition of Personal Finance, 2002). Jump$tart Questionnaire Spending and Credit Subscale This subscale has 11 questions which is the largest number of questions for all of the subscales. It test s

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51 ability to comp are the benefits and costs of spending decisions, evaluate information about products and services, and their knowledge of the rights and responsibilities of buyers and sellers under consumer protection laws. It tests their ability to analyze the benefits and costs of consumer credit, to compare the advantages and disadvantages of different payment method and to compare the sources of consumer credit. It tests their knowledge of factors that affect creditworthiness and the purpose of credit records and ways to avoid or correct credit problems (Jump$tart Coalition of Personal Finance, 2002). The spending and credit subscale is evaluated using item s 24, 29, 30, 31, 38, 39, 41, 43, 44, 49, and 50 (Jump$tart Coalition of Personal Finance, 2002). Evaluation of the Jump$tart Questionnaire The Jump$tart questionnaire was evaluated by Thomas Lucey, an independent researcher, in 2005 using the results of the 1997 and 2000 questionnaire results. The 1997 questionnaire was administered to 1,532 high school seniors na tionwide while the 2000 questionnaire was administered to 723 high school seniors nationwide. Lucey (2005) evaluated the consistency, validity, and social bias of the questionnaire. Consistency Using Kuder Richardson 20 (KR20) to evaluate the internal con sistency, L u cey (2005) reported that the entire Jump$tart questionnaire had moderately high intern al Table 2 shows that the internal consistency of the subscales ranged from low to moderate levels the highest consistency level being the spending and

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52 he subscales were attributed to the overlapping financial tenets and the limited number of items for some subscales. Table 2 Consistency of the Jump$tart Questionnaire Subscales Income 0.58 Money Management 0.23 Savings and Investment 0.43 Spending and Credit 0.59 Overall Survey 0.78 Note A. Lucey, 2005, Journal of Family and Economic Issues, 26 p. 287. Copyright 2005 by Springer Science & Busines s, Inc. Reprinted with permission of the author Lucey (2005) calculated the test retest reliability. He identified that eight of the 31 items showed a significant difference in the responses. Due to the low level of consistency of the s ub scales as is sh own in Table 2 only the overall score will be used and evaluated in this study. Table 3 shows that the income subscale had the highest number of items with responses that were statistically different. The author pointed out that achievement data

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53 was not c ollected and the participants were randomly chosen from high schools across the country. Table 3 Number of Statistically Different Responses in Test Retest Reliability Evaluation of Jump$tart Questionnaire Subscales Number Income 4 Money Management 1 Savings and Investments 2 Spending and Credit 1 Note A. Lucey, 2005, Journal of Family and Economic Issues, 26 p. 288. Copyright 2005 by Springer Scien ce & Business, Inc. Adapted with permission of the author. Validity Lucey (2005) evaluated the validity by reviewing literature related to the development of the survey, prior financial literacy measures, related research, and communication with the Jump$ tart Coalition. He identified that the questionnaire has face and content validity. In the development of the questionnaire it was reviewed by financial professionals and educational leaders to ensure that the questionnaire aligned riculum guidelines which are the most widely recognized and accepted financial education standards (Mandell, 2004). The test portion of the

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54 questionnaire is comprised of 31 questions although the Coalition has 49 benchmarks for high school students. This limits the validity of the subscales but after accounting for overlapping financial areas the difference in number of questions compared to the number of benchmarks does not affect the overall validity of the questionnaires test for financial literacy (Lac ey, 2005). In this study the subscales will not be used to assess the participants due to the low level of consistency that was computed for each individual subscale. Social Bias Lucey (2005) had 27 social studies teachers evaluate the Jump$tart question naire for social bias. He wanted the teachers to evaluate whether they believe the questionnaire would be interpreted similarly by, a) students of different races or ethnicities, b) students of different family income, c) students of different family wealth, d) studen ts of different living circumstances (e.g. living at home, living on own) Lucey (2005) identified some social bias in 15 items. Lucey (2005) determined that students of different ethnicities, family income and home environment would interpret the 15 questi ons differently. With one representing a low agreement with common item interpretation and four representing a high agreement with common item

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55 interpretation, 15 items were below = 3. An example of questions that were identified as having social bias is: 1. Which of the following types of investment would best protect the purchasing power of a family's savings in the event of a sudden increase in inflation? 2. If you are behind on your debt payments and go to a responsible credit counseling service such as the Consumer Credit Counseling Services, what help can they give you? Lucey (2005) pointed out that some of the least agreed upon items related to tax rates, business tax effects, college savings, growth investments, government protection, emergency funds, a nd inflation. This difference was attributed to the greater familiarity upper socio economic students would have with the content. Any trends associated with a socio economic group will be identified. Data Collection The appropriate IRB approval was recei ved and the Research Request form was completed and submitted to the Office of the Registrar at a large Research I University located in the Southeastern United States along with a copy of the IRB approval form. The Research Request form requested the emai l addresses of all students who had completed at least 105 credit hours at the main campus and had applied for graduation during the summer semester of the 2007 2008 academic year. The email address of 1357 graduating college seniors was received from the Office of the Registrar. Te collection of data was conducted over a six week period with emails being sent to all 1357 email addresses received. Participants received four emails from the researcher. They received

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56 an initial email with the link to the ques tionnaire (see Appendix B), two reminder emails (see Appendix C & D) also containing the link to the questionnaire and the final email thanking everyone for participating in the survey (see Appendix E). It has been demonstrated that reminder emails increas e the probability that a participant will complete a questionnaire (Kaplowitz, Hadlock & Levine, 2004). Email distribution lists were created using the email addresses received from the Office of the Registrar. To reduce the probability that the email secu rity and firewall were created containing no more than 50 email addresses. Al l emails were blind copied to the email addresses in the distribution lists. The initial email (see Appendix B) was sent to university seniors with a link to the survey informing them that if they wish to participate in the study they may complete the sur vey. Two weeks later, the first reminder email (see Appendix C) was sent thanking everyone for their assistance and reminding the participants that ha d not completed the survey to respond. The second reminder email (see Appendix D) was sent two weeks after the first reminder email was sent. The two reminder notices contained the link to the questionnaire to increase the probability of the participants completing the questionnaire (Schaefer & Dillman, 1998). A general thank you email (see Appendix E) was sen t two weeks after the last reminder email to acknowledge the assistance of all the participants. The instrument was administered online using the S urvey M onkey online questionnaire website. The questionnair e and responses were hosted on S urvey M

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57 se cure server. After the six weeks of data collection had expired, access to the questionnaire was removed. The responses were uploaded from survey monkey to SAS statistical software for analysis. The minimum number of participants required for this study wa s 156. Research question one require d 52 participants for each of its three groups to have an 80% probability of identifying a medium effect size (Stevens, 1999). The results from the participants w ere used for all the research questions. Since research qu estions two, three and four require d one w as used to determine the number of participants required for the proposed study. A total of 227 (16.73%) graduating university students partic ipated in the study. Data Management The data that wa s uploaded from the online survey software was analyzed using SAS statistical software. The results of questionnaires that were at least 90% complete were included in this study. All questionnaires wi th less than 90% of the test section complete d were eliminated from the study. Forty one of the participants were eliminated from the study because they had completed less than 90% of the questionnaire. One hundred and eighty six (n=186 13.71% ) graduating university students responses were used in this study. Eighty four (45.16%) males and one hundred and two (54.84%) females participated in the study which is comparable to the undergraduate student population of 40.7% males and 59.3% females.

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58 Of the 186 participants that were used seven (7) students did not fully complete the questionnaire although they completed more than 90% of the questionnaire. The questions that were not completed were viewed as incorrect in the calculation of the financial literacy scores. For the test section of the Jump$tart Questionnaire the nominal value of 1 was assigned to the correct answers and the nominal value of 0 was assigned to the incorrect answers. The answers in the demographic section of the questionnaire were assig ned nominal values. The rating scale developed my Mandell (2004) to determine financial literacy using the scores earned on the Jump$tart survey was used in this study to determine financial literacy levels Score s of 70% or greater w ere viewed as a high l evel of financial literacy Scores between 50% and 70% w ere views as a average level of financial literacy Score s of 50% or less w ere viewed as a low level of financial literacy Univariate and Bivariate Analysis The ethnicity of the participants was prese nted and similarities and differences to Richardson 20 (KR20) was calculated and reported for the overall questionnaire. The mean, standard deviation, skewness, and kurtosis were presented and used to evalu ate the financial literacy level of graduating seniors. Differences in the means as it relate to education major, income level and gender were also evaluated.

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59 Multivariate Analysis Research Question 1 An analysis of variance (ANOVA) was conducted. The fi nancial literacy level of university seniors was evaluated using the moderating factors of business minor, business major and non or greater was used to determine if any of the interactions between t he groups were statistically significant. The Typ The dependent variable was the financial literacy level of university seniors. The independent variable was the moderating factors of business major, business minor and non business major. The minimum number of participants req uired to have 80% probability of identifying a medium effect size for this study was 52 participants per group which totals 156 (Stevens, 1999). Research Question 2 A correlation was conducted. Two relationships were evaluated: 1. The relationship betwee n financial literacy level and student credit card debt. 2. The relationship between financial literacy level and student loan debt. The r value was reviewed and a p value of 0.05 or less was used to determine statistically significance. The dependent va riable was the financial literacy level of university seniors. The independent variable was the credit card and student loan debt level.

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60 Research Question 3 A multiple regression was conducted. The relationship between financial literacy levels and the predictor variables of gender, employment status, ethnicity, family income and college major was evaluated. The predictor variables were coded in the order listed from X 1 to X 5 2 = 0.15 or greater was used to determine if any of the effect the factors had on financial literacy and the studentized residual value. The independent variables were gender, employment status, ethnicity, famil y income and college major. The dependent variable was the financial literacy level. The minimum number of participants required to compute the multiple regression was 109, (N >= 104 + m, where m = number of independent variables) (Tabachnick & Fidell, 200 0). Research Question 4 A multiple regression was conducted. The relationship between debt levels and the predictor variables of gender, employment status, ethnicity, family income and college major was evaluated. The predictor variables were coded in th e order listed from X 1 to X 5 2 = 0.15 or greater was used to determine if any of the effect the factors had on financial literacy levels were statistically d the studentized residual value. The independent variables were gender, employment status, ethnicity, family income and college major. The dependent variable was the debt literacy level. The

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61 minimum number of participants required to compute the multiple regression was 109, (N >= 104 + m, where m = number of independent variables) (Tabachnick & Fidell, 2000).

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62 Chapter 4 Results Limited study has been completed on the financial literacy of university students. The purpose of this study wa s to assess th e financial literacy of graduating seniors to add to the body of research that has been done on the financial literacy of university students Based on prior research, this study was designed to investigate the following questions: 1. What differences exist i n the financial literacy levels between university seniors who graduate with a major in business, a minor in business or a major in a non business field? 2. literacy level and their a) credit card debt level and b) student loan debt level? 3. To what degree does gender, employment status, ethnicity, family income and college major predict financial literacy levels of graduating university seniors? 4. To what degree does gender, employment sta tus, ethnicity, family income and college major predict the debt level of graduating university seniors?

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63 Univariate and Bivariate Analysis A total of 227 graduating university students participated in the study. Forty one of those participants were el iminated from the study because they had completed less than 90% of the questionnaire. One hundred and eighty six (n=186) graduating university students responses were used in this study. Of the 186 participants that were used seven (7) students did not fully complete the questionnaire although they completed more than 90% of the questionnaire. Eighty four (45.16%) males and 102 (54.84%) females participated in the study. College Participation Of the eight colleges of the university that grant undergrad uate degrees and as is shown in Table 4 College of Education, and Visual and Performing Arts had no participation. The College of Arts and Sciences which is the largest undergraduate college had the highest number of students participating with 114 gradua ting seniors participating. Although the College of Arts and Sciences had the highest number of student participation this number represented only 14.4% of the students graduating from the college. Table IV illustrates that Undergraduate Studies and Honors College both with small numbers of graduating seniors had the highest percentage of students participating in the study 28.6% and 23.1% respectively. The College of Arts and Sciences and the College of Business together accounted for 88.2% of the partici pants. The participants from the College of Arts and Sciences were the majority of the respondents with 114 participants represent ing 61.3% of the sample as illustrated in Table 4 The College of Business with 50 participating

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64 graduating senior s represent ed 26.9% of the sample and the School of Nursing participants represented 5.9%. Undergraduate Studies, Honors College and the College of Engineering had the lowest level s of overall participation in the sample with 6 (3.2%), 3 (1.6%) and 2 (1.1%) respectiv ely. Students graduating with majors in multiple colleges were able to identify only one college. Table 4 Participation by College College Number of Graduating Students Number of Participants Questionnaire Return Rate Overall Participation Level Arts and Sciences 792 114 14 4 % 61.3% Business 304 50 16 4 % 26.9% Education 31 0 0.0% 0.0% Engineering 90 2 2 2 % 1.1% Honors 13 3 23.1 % 1.6% Nursing 62 11 17 7 % 5.9% Undergraduate Studies 21 6 28 6 % 3.2% Visual and Performing Arts 44 0 0.0% 0.0% Students w ere only able to identify one graduating college

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65 Ethnicity The ethnic distribution of the sample is representative of the institution. As is shown in Table 5 136 Caucasian students participated in the study which represents 73.1% of the sample, while 28 Hispanic American Asian American and Native American participation was 14 (7.5%) 3 ( 1.6 %) and 5 (2.7%) respectively. Table 5 Ethnicity of the Participants Ethnicity Number of Participants Percentage Insti tution Percentage White or Caucasian 136 73.1% 69.8% Black or African American 28 15.1% 11.5% Hispanic American 14 7.5% 10.1% Asian American 3 1.6 % 5.6% Native American 5 2 7 % 0.5% Other 0 0.0% 2.5% n = 186

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66 Business Major/Minor Table 6 shows 60 participants (32%) identified themselves as being business major s 31 participants (17%) were business minors and 95 participants (51%) were non business students. Although Table 4 and 6 seem to show discrepant information relating to the number of partici pants that are business majors it should be noted that the questionnaire did not allow students with multiple majors to indentify all of the colleges from which they were graduating. Table 6 Business Major, Minor and Non Business Distribution Number of Participants Percentage Business Major 60 32% Business Minor 31 17% Non Business 95 51% n = 186 Average Credit Card Balance Seventy five (75) participants which represents 40% indicated that they did not keep a credit card balance 17 participants p referred not to answer and two were unsure of their average credit card balance. A total of 92 participants answered the question and indicated that they kept a balance on their credit card. Table 7 presents the breakdown of the participants average credi t card balance. Th irty nine participants (2 1 %) kept their

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67 credit card balance below $1,000. The majority of the participants (61%) either kept no balance on their credit card or kept their balance below $1,000. Table 7 Average Credit Card Balance Average Credit Card Balance Number of Participants Percentage Less than $1,000 39 21 % $1,000 $2,500 17 9% $2,500 $5,000 16 9 % $5,000 $7,500 6 3 % More than $7,500 14 8 % Did not keep a balance 75 40% Prefer not to answer 17 9% Does not know the balance 2 1% n = 186 Student Loan Debt Eighty one (81) participants indicated that they have never borrowed and 12 participants preferred not to answer the question. Half of the participants (n=93) answered the question and indicated that they have borrowed s tudent loans. Table 8 shows the participants student loan balance s The result from the study shows that 2 5%

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68 of the participants have student loan balances that exceed $20,000 with 11 % having balances greater than $25,000. Table 8 Student Loan Balance St udent Loan Balance Number of Participants Percentage Less than $5,000 15 8 % $5,000 $10,000 10 5 % $10,000 $15,000 6 3 % $15,000 $20,000 15 8 % $20,000 $25,000 26 14 % More than $25,000 21 11% Never borrowed 81 44% Prefer not to answer 12 7% n = 186 Financial Literacy Score The internal consistency of the questionnaire was evaluated using Kuder Richardson 20 (KR20), the questionnaire had moderately high internal cons istency with The financial literacy scores ranged from 13% to 100%. The distribution had a mean score of 72.56 and a median of 75.50. The mean score of this study was higher than the participants mean scores of the thr ee primary financial li teracy studies conducted

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69 eariler Chen and Volpe (1998) participants had a mean fin ancial literacy score of 52.87%. A lthough Danes and Hira (1987) did not specify the mean financial literacy score of the ir participants the mean score fell between 40% 59 % T he participants of the Volpe, Chen and Pavlicko (1996) study had a mean financial literacy score of 44%. As is outlined in Table 9 the distribution was significantly negatively skewed (skew = 1.47) which indicates that the majority of the financial l iteracy scores were on the high end, and it was leptokurtic (k = 3.89 ) which indicated that the majority of the financial literacy scores were close to the mean score. Table 9 Financial Literacy Score Distribution Mean Standard Deviation Skewness Kurtosi s Financial Literacy Score 72.56 14.12 1.47 3.89 n = 186 There were four outliers on the low end of scores and these scores are two standard deviations from the mean. There are three extremes also at the low end of the scoring range and these scores are at least three standard deviations from the mean. The outliers and extremes were on the low end of the scoring scale and were considered during the multivariate analysis.

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70 Multivariate Analysis Research Question 1 1. What differences exist in the financi al literacy levels between university seniors who graduate with a major in business, a minor in business or a major in a non business field? An Analysis of Variance (ANOVA) was conducted to identify what if any difference existed in the financial literacy levels of university senior who graduate with a major in business, a minor in business or a major in a non business field. The distribution of the financial literacy scores were examined separately for business majors, business minors and non business maj ors. A summa ry including the mean, standard deviation, skewness and kurtosis values is provided in Table 10 The distribution of each group was negatively skewed, business major s (skew = 1.699), business minor s (skew = 0.819) and non business (skew = 1 .082). Both the business major group and the non business group had outliers on the low end with the business major group having extremes on the low end. The business minor group had neither extremes nor outliers. The business major distribution was notabl y leptokurtic (k = 4.088) which indicates that the majority of the financial literacy scores are close to the mean (73.267). The kurtosis of business minor (k = 0.668) and non business major (k = 0.652) is close enough to zero for the distribution to be viewed as normal.

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71 Table 10 Distribution of Business Major, Minor and Non Business Major N Mean Standard Deviation Skewness Kurtosis Business Major 60 73.267 18.208 1.699 4.088 Business Minor 31 77.226 10.500 0.819 0.668 Non Business Major 95 70 .600 11.745 1.082 0.652 n = 186 weighted Analysis of Variance (ANOVA) was used to evaluate the financial literacy level of university seniors using the moderating factors of business minor, business major and non business major. To provide a standardized measure of effect size 1) F/n)] was calculated to be 0.171. This can be interpreted to mean that the group means typically deviate from the grand mean by about 0.2 standard deviat ions. An effect size of (f = 0.171) is viewed as small using the rough guidelines of (0.1 small, 0.25 medium, 0.4 large). A summary table of the ANOVA is provided in Table 11 The obtained F (2,183) = 2.73, p = 0.068, was judged to be not statistically sig nificant using the predetermined the mean financial literacy score for business major s minor s and non business majors do not differ significantly. This

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72 would indicate that a major in business does n ot have a significant impact on financial literacy scores Table 11 ANOVA results for Business Major, Minor and Non Business Majors DF Sum of Squares Mean Square F Value Pr > F Model 2 1068.773 534.886 2.73 0.068 Error 183 35833.953 195.814 Correcte d Total 185 36903.726 n = 186 ; The three extremes and four outliers were removed from the sample and the distribution was reviewed and the ANOVA was recalculated. The distribution of the adjusted financial literacy scores were examined separately for business majo rs, business minors and non business majors. A summa ry including the mean, standard deviation, skewness and kurtosis values is provided in Table 12 The business major group had a distribution that was almost normal (skew = 0.075) because the skewness va lue was close to zero. The business minor and the non business groups were negatively skewed (skew = 0.819) and (skew = 0.847) respectively. The financial literacy scores w ere normally distributed around the mean because the Kurtosis value for all group s was close enough to zero as is illustrated in Table 12

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73 Table 12 Distribution of Business Major, Minor and Non Business Major after Adjusting for Outliers and Extreme Values N Mean Standard Deviation Skewness Kurtosis Business Major 57 7 6.439 1 2 0 19 0.075 0.821 Business Minor 31 77.226 10.500 0.819 0.668 Non Business Major 91 7 1 989 9 887 0.847 0.132 A summary table of the recalculated ANOVA is provided in Table 13 The obtained F (2,1 76 ) = 4 41 p = 0.0 14 was judged to be statistically significant using the This result suggests that at least two of the groups differ significantly. To determine which two groups differ from each other by a statistically significant amount a Tukey test of all pa irwise comparisons was conducted.

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74 Table 13 ANOVA results for Business Major, Minor and Non Business Majors Financial Literacy Scores after Adjusting for Outliers and Extreme Values DF Sum of Squares Mean Square F Value Pr > F Model 2 10 12 037 5 06 019 4 .41 0.0 14 Error 1 76 20194.443 114.741 Corrected Total 1 78 21206.480 n = 179; Type I error rate Table 14 presents the results of the Tukey pairwise comparison of the mean differences for the business majors, minors and non business majors after eliminating the outliers and extreme values. The results indicate that the business major s group differs significantly from the non business major s group. This result is similar to the findings of Volpe, Chen, and Pavlicko (1996), Chen and Volpe (1998) and Murphy (2005) who found that business majors scored significantly higher on financial literacy s urveys than non business majors. The business minors and majors did not differ significantly nor did the business minors and non business majors.

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75 Table 14 Tukey Pairwise Comparison of Business Majors, Minors and Non Business Majors Business Major Comparis on Mean Difference Simultaneous 95% Confidence Limits Minor s Major s 0.787 4.863 6.438 Minor s None 5.237 0.029 10.502 Major s None 4.450 0.173 8.727 *** *** Indicates comparisons significant at the 0.05 level Research Question 2 2 What is the r literacy level and their a) credit card debt level and b) student loan debt level? 1. The relationship between financial literacy level and student credit card debt 2. The relationship between financial literacy level and student loan debt. literacy levels and credit card debt was (r = 0.0579, p = 0.4575). T he relationship between financial literacy levels and student loan debt was (r = 0.0314, p = 0.6812). To determine if these results were statistically significant a p value of 0.05 or less was required. Both relationships had p values greater than 0.05 a s is displayed in Table 15

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76 Based on the results it was found that financial literacy levels have no statistically significant relationship with credit card debt or student loan debt. analysis was conducted on the revised financial literacy scores after the extremes and outliers were eliminated. There was no significant change to the results, so the extreme and outlying scores were used in the calculation. Table 15 Correlation of Financial Literacy Level to Credit Card & Student Lo an Debt R p Financial Literacy Level & Credit Card Debt 0.0579 0.4575 Financial Literacy Level & Student Loan Debt 0.0314 0.6812 n = 186 Question 3 and 4 3. To what degree does gender, employment status, ethnicity, family income and college major predi ct financial literacy levels of graduating university seniors? 4. To what degree does gender, employment status, ethnicity, family income and college major predict the debt level of graduating university seniors?

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77 A mu ltiple regression analysis was performe d for questions 3 and 4 to evaluate the relationship of the predictor variables of gender, employment status, ethnicity, family income and college major on financial literacy scores and debt level. Before a statistically computation was run employment sta tus was reordered and assigned values ranging from zero to five. The value assigned are listed below. 0 I have never been for mally employed outside the home. 1 I work full time in the summers and p art time during the school year 2 I work full ti 3 I work part time in the summers and part time during the school year. 4 5 I work full time for the entire year. The family income value used in this study was based on the type of financial aid the student indicated they had recei ved and is more clearly explained by Table 1. The ethnic groups were separated into individual variable s For each ethnic group a nominal value of one was used to identify the participants in that group and zeros were used to identify all other ethnic groups. The Asian American ethnic group was used as the reference group in the computation of the multiple regressions. College majors, minors and non majors were also similarly separated into individual variables. The non business group was used as the reference group for the calculation of the multiple regression s A correlation analysis was performed prior to the multiple regressions to exa mine the relationship s between the predictor variables to determine if any of the predictors should be eliminated The relationship s are summarized in Table 16 The majority of the relationships between the predictor variables were negative.

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78 Table 16 A nalysis of relationship s between predictor variables Gender Employ History Caucasian African American Hispanic Native American Asian American Family Income Business Major Business M in or Non Business Gender 1.000 0.08 9 0.230 0.258 0.0004 0.140 0.056 0.0 95 0.197 0.151 0.04 0.116 0.114 0.016 0.829 0.025 0.731 0.058 0.432 0.067 0.364 Employ History 0.08 9 0.230 1.000 0.084 0.257 0.106 0.153 0.112 0.130 0.174 0.018 0.016 0.829 0.078 0.290 0.064 0.389 0.096 0.194 0.012 0.871 Caucasian 0.258 0.00 04 0.084 0.257 1.000 0.694 <.0001 0.461 <.0001 0.274 0.0002 0.211 0.004 0.27 0.0002 0.230 0.002 0.141 0.055 0.110 0.135 African American 0.143 0.056 0.106 0.153 0.694 <.0001 1.000 0.120 0.103 0.07 0.343 0.054 0.465 0.078 0.290 0.031 0.6 73 0.108 0.144 0.051 0.489 Hispanic 0.095 0.197 0.112 0.130 0.461 <.0001 0.120 0.103 1.000 0.047 0.520 0.037 0.621 0.080 0.280 0.326 <.0001 0.128 0.083 0.21 0.004 Native American 0.151 0.04 0.174 0.018 0.274 0.0002 0.07 0.343 0.047 0. 520 1.000 0.021 0.773 0.081 0.272 0.028 0.709 0.074 0.313 0.03 0.688 Asian American 0.116 0.114 0.016 0.829 0.211 0.004 0.054 0.465 0.037 0.621 0.021 0.773 1.000 0.080 0.272 0.003 0.968 0.172 0.019 0.131 0.075 Family Income 0.016 0.829 0.078 0.290 0.27 0.0002 0.078 0.290 0.080 0.280 0.081 0.272 0.080 0.272 1.000 0.002 0.983 0.01 0.892 0.006 0.935 ( t able continues )

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79 Table 16 (C ontinue d ) Gender Employ History Caucasian African American Hispanic Native American Asian American Family Income Business Major Business M in or Non Business Business Major 0.025 0.731 0.064 0.389 0.230 0.002 0.031 0.673 0.326 <.0001 0.028 0.709 0.003 0.968 0.002 0.983 1.000 0.309 <.0001 0.705 <.0001 Business Minor 0.058 0.432 0.096 0.194 0.141 0.055 0.108 0.144 0.128 0.083 0.074 0.313 0.172 0.019 0.01 0.892 0.309 <.0001 1.000 0.457 <.0001 Non Business 0.067 0.364 0.012 0.871 0.110 0.135 0.051 0.489 0.21 0.004 0.03 0.688 0.131 0.075 0.006 0.935 0.705 <.0001 0.457 <.0001 1.000 n = 186

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80 There were three results that ha d a studentized residual value larger than 3.0. and four that fell between the range or 2.0 to 3.0. There was one value that had a studenti will not have an effect on the regression equation ( Pedhazur 19 82 ) Question 3 A multiple regression was conducted to evaluate the relationship between financial literac y levels and the predictor variables of gender, employment status, ethnicity, family income and college major. The obtained R 2 value was 0. 37 which suggest s that about 37 % of the variance in the participants financial literacy score wa s accountable by the set of predictor variables. The adjusted R 2 value was 0. 33 which indicate d 2 = R 2 / (1 R 2 )] was calculated and resulted in a value of 0.5 8 which wa s interpreted as a large effect size using the rough guidelin es (0.02 small, 0.15 medium, 0.35 large). T he prediction equation that was derived from this analysis was : Financial Literacy Level ^= 7 8 77 4 .7 5 G ender + 0.89 Employment History 3 94 Caucasians 12.3 African American 31.59 Hispanics 1 7.89 Native American 2 55 Family Income + 7 .44 Business Major + 5.02 Business Minor The data presented in T able 17 indicated that three of the predictor variables are statistically significant. The data presented in Table 17 showed g ender Hisp anic and business major being the three predictor variables that ha d a statistically significant impact on the prediction of financial literacy level.

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81 Table 17 Standardized Regression Coefficient Predictor t value p value Gender 2. 63 <0.0001 Employmen t History 1.51 0. 1 3 25 Caucasian 0 .5 7 0.5720 African American 1.71 0.0893 Hispanic 4.16 < 0.00 01 Native American 2.07 0.0396 Family Income 1 .36 0. 1 7 59 Business Major 3.67 0.0003 Business Minor 2.02 0.0447 n = 186 With one ethnic group having b een identified as being a significant predictor of financial literacy level, an R 2 change test was conducted to identify the effect that ethnicity has on financial literacy scores. After eliminating all ethnic groups a revised R 2 was calculated. The revise d R 2 was 0.12 which suggests that 12% of the variance in the participants financial literacy score was accountable by the set of predictor s excluding ethnicity. The R 2 change test resulted in F (4,176) = 17.46 1 with a p value less than 0.05 This suggests that ethnicity is a statistically significant predictor of financial literacy score.

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82 Question 4 A multiple regression was conducted to evaluate the relationship between debt levels and the predictor variables of gender, employment status, ethnicity, fam ily income and college major. The obtained R 2 value was 0. 1 0 which suggests that about 10 % of the variance in the participants debt level s wa s accountable by the set of predictors. The adjusted R 2 value was 0.0 6 which indicate d 992) effect size [f 2 = R 2 / (1 R 2 )] was calculate d and resulted in a value of 0.12 which wa s interpreted as a small effect size using the rough guidelines (0.02 small, 0.15 medium, 0.35 large). The prediction equation that was derived from this analysis was: Debt Level ^= 16077 + 1373.89 Gender + 1601.00 Employment History 10946 Caucasians 6759.71 African American 16122 Hispanics 8714.05 Native American 1140.94 Family Income + 3436.80 Business Major + 1970.62 Business Minor As is seen in Table 18 the Hispanic ethnic group (t(174) = 1.99, p = 0.0047) was the only variable that was a statistically significant predictor of debt level.

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83 Table 18 Standardized Regression Coefficient Predictor t value p value Gender 0.71 0 .4764 Employment History 2.55 0.1927 Caucasian 1.48 0.1416 African American 0.88 0.3798 Hispanic 1.99 0.0047 Native American 0.95 0.3447 Family Income 0.57 0.5688 Business Major 1.59 0.1133 Business Minor 0.74 0.4576 n = 186 With one ethnic group having been identified as the only significant predictor of debt level, an R 2 change test was conducted to identify the effect that ethnicity has on debt level. After eliminating all ethnic groups a revised R 2 was calculated. The revised R 2 was 0.07 which suggests that 7% of the variance in the participants debt level was accountable by the set of predictors excluding ethnicity. The R 2 change test resulted in F (4,176) = 1.46 7 the p value is greater than 0.05 This suggests that ethnicity is not a st atistically significant predictor of debt level.

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84 Additional Findings Ethnicity There was a difference in the financial literacy of the participants based on their ethnicity. As is represented in Table 19 the Caucasians and Asian Americans performed bes t with financial literacy scores of 76.08 and 77.23 respectively. The Hispanic Americans had the lowest average financial literacy score of 50.85. African Americans and Native Americans had average financial literacy scores of 67.25 and 64.80 respectively. Table 19 Mean Financial Literacy Score Distribution by Ethnicity Ethnicity N Mean Standard Deviation White or Caucasian 136 7 6 08 10.93 Black or African American 28 67.25 10.99 Hispanic American 14 50.85 22.97 Asian American 3 77.23 5.02 Native Amer ican 5 64.80 17.53 n = 186

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85 An ANOVA was calculated to further evaluate f inancial literacy scores using ethnicity as the moderating factor. A summary table of the ANOVA is provided in Table 20 The obtained F (4 18 1 ) = 1 5 5 3 p = < 0 0 0 1 was judged to be statistically significant This result suggest ed that there wa s a significant difference in the financial literacy scores of the participants based on their ethnicity Table 20 ANOVA results for Ethn icity Comparison of Financial Literacy Scores DF Sum of Squares Mean Square F Value Pr > F Model 4 9429.871 2357.463 15.53 <.0001 Error 1 81 27473.874 151.789 Corrected Total 1 85 36903.726 Table 21 presents th e Tukey pairwise comparison of the mean differences for the ethnic groups. The results indicate d that the re wer e four ethnic group comparisons that differed significantly from each other The Hispanic American group with an average financial literacy score of 50.85 which was the lowest mean financial literacy score of all the ethnic groups differed significantly from the scores of the Caucasians, African Americans and Asian Americans. The Caucasian financial literacy scores also differed from the scores o f the African Americans.

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86 Table 21 Tukey Pairwise Comparison of Ethnicity Ethnicity Comparison Mean Difference Simultaneous 95% Confidence Limits Caucasian African American 8.831 1.786 15 876 *** Caucasian Hispanic American 25.224 15.695 34.752 ** Caucasian Asian American 0.919 20.734 18.896 Caucasian Native American 11.281 4.178 26.740 African American Hispanic American 16.393 5.281 27.5.5 *** African American Asian American 9.750 30.373 10.863 African American Native Amer ican 2.450 14.032 18.932 Hispanic American Asian America 26.143 47.741 4.545 *** Hispanic American Native American 13.943 31.629 3.744 Asian American Native American 12.200 12.592 36.992 *** Indicates comparisons significant at the 0.05 level Gender An evaluation of the mean financial literacy scores for males and female s i ndicated that males had a higher financial literacy score with a mean score of 76.18% compared to females with a mean score of 69.59%. An ANOVA was calculated to fur ther evaluate financial literacy scores using gender as the moderating factor. A summary table of the ANOVA is provided in Table 22 The obtained F (1 185 ) = 10 55 p = 0. 0 0 14 was judged to be statistically significant using the predetermined Type I error

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87 This result suggest ed that the financial literacy scores of male graduating seniors differ significantly from females. Table 22 ANOVA results for Male and Female Financial Literacy Scores DF Sum of Squares Mean Square F Value Pr > F Model 1 2000.698 2000.698 10.55 0. 0 0 14 Error 1 84 34903.027 189.690 Corrected Total 1 85 36903.726 n = 186 ; Money Management Knowledge With all the interest in recent times relating to financial literacy in the media due to the current economic downturn it is understandable that 97 participants (52.15%) indicated that they would take the personal finance course if it w ere offered at the i r institution. Interestingly the university offers a personal finance course every fal l and spring semester that is open to all undergraduate students but 161 participants (86.56%) did not know if the university offered a personal finance course. The majority of participants (n=102, 54.84%) also indicated that their primary method of lear ning money management was from their own experience while the second highest method (n=76, 40.86%) was learning at home from their families. This finding wa s in line with the findings of Thaden and Rookey, ( 2004 ), who found that the majority of their part icipants either lea r ned about money management from their own experience

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88 or from their families. With the participants learning their money management skills primarily on their own or from family members they indicated that they ha d not learned one of the basic money management skills of monthly budgeting. Fifty seven percent (57%) of the participants indicated that they did not prepare a monthly budget. Summary The initial results of study showed that there was no difference between business majors, mi nors and non business majors i n their performance on the financial literacy questionnaire. After adjusting for outliers and extreme values it was found that participants with a major in business perform better on financial literacy surveys than non busine ss majors. A regression equation was developed that could attribute to 26% of the variance in a financial literacy score. In chapter 5 the implications of the findings will be discuss ed and recommendations will be given.

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89 Chapter 5 Findings, Recommenda tions and Implications This study focused on the financial literacy of graduating university seniors by assessing differences in the financial literacy level of business majors, minors and non business majors. The relationship s between financial literac y level s and credit card and student loan debt were also evaluated. G ender, employment status, ethnicity, family income and college major were also factors that were explored to determine if they were predictors of student financial literacy and debt level s. Findings This study o f financial literacy among graduating university seniors was conducted in one large urban public Research I ntensive U niversity in the Southeastern United States. The findings of this study could possibly be used to compare results from other large urban public Research I ntensive U niversities that enroll a similar type of student body. The three previously conducted major financial literacy research studies were conducted at Iowa State University (Danes & Hira, 1987) Youngstown Sta te University in Ohio (Volpe, Chen & Pavlicko, 1996) and four unnamed universities in the Midwest (Chen & Volpe, 1998). These s tudies were all conducted at universities in

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90 Midwestern states with smaller student populations. Murphy (2005) conducted a finan cial literacy study at a university in the Southeastern United States but her institution was a small historically black university. The findings of this study can thus assist future researchers examin in g the financial literacy of college seniors at large urban Research I universities. The f inancial literacy level rating scale reported by Mandell (2004) was used to determine th e financial literacy levels of the graduating university seniors. Mandell indicated that: Scores of 70% or greater were viewed as a high level of financial literacy Scores between 50% and 70% w ere viewed as a n average level of financial literacy Scores of 50% or less were viewed as a low level of financial literacy The descriptive data indicated that the average financial literacy scor e of university seniors participating in this investigation was 72.56 B ased on the above noted financial literacy levels this group has a high level of financial literacy. This finding is not consistent with the results of any previous research. The prev ious research showed financial literacy scores below 60% which w ere viewed as low levels of financial literacy. Danes and Hira (1987) did not report the specific mean financial literacy score of the ir participants they reported only that the mean score f ell between 40% 59% T he participants in the Volpe, Chen and Pavlicko (1996) study had a mean financial literacy score of 44%, and Chen and Volpe (1998) participants had a mean financial literacy score of 52.87%. Although there was no clear indication for the cause of why the average

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91 financial literacy score of participants in this study was so much higher than that of previous research it should be noted that the earlier research was conducted 10 20 years ago. Also this questionnaire was administer ed on line and participants voluntarily completed the questionnaire. It is possible that the least financially litera te students invited to participate in the study did not complete the questionnaire. Another reason for the higher average financial literac y score of participants in this study could have been that they had an above average level of interest in the area and thus had above average knowledge about financial matters Although the financial literacy l evel identified in this study indicate that university seniors at this Research I ntensive U niversity in the Southeastern United States have a high financial literacy level it should also be noted that within the university there was no participation by students from some colleges (i.e. education, a nd visual and performing art) and other colleges had limited participation (i.e. engineering, honors and nursing) The limited participation of some colleges along with the higher percentage of participation by students in the Colleges of Business, and Art s and Sciences might have inflated the average financial literacy score thus affecting the generalizability of the results. Research Question 1 1. What differences exist in the financial literacy levels between university seniors who graduate with a major in business, a minor in business or a major in a non business field?

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92 Two analyses were conducted to answer this question. The first analysis which had four outliers and three extreme values on the low end of scores indicated that there was no difference i n the financial literacy levels of university seniors that graduate d with a major in business, a minor in business or a major in a non business field. The outliers we re two standard deviations away from the mean score and the extreme scores we re three stan dard deviations away from the mean. These outliers and extreme values lower ed the average score which sometimes limit s the ability to identify differences. Because of anonymity in the completion of the survey it could not be determined if the outliers and extreme values were real values. The three extreme scores and four outliers were removed from the sample the distribution was reviewed and the ANOVA was recalculated to determine if any difference would be subsequently identified The distribution of th e adjusted financial literacy scores w as examined separately for business majors, business minors and non business majors. The second analysis was conducted after the outliers and extreme values were removed A statistically significant difference in the financial literacy scores of university seniors with major s in business and those majoring in a non business field was now apparent This finding wa s consistent with the findings of Volpe, Chen, and Pavlicko (1996), Chen and Volpe (1998) and Murphy (2005) who found that business majors scored significantly higher on financial literacy surveys than non business majors. Although the average financial literacy score in this study was not representative of previous studies similarities still existed in the differences in the performance of

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93 business majors and non business majors on the financial literacy questionnaire. This consistent finding suggests that participants majoring in business are more financially literate than non business majors. It should be noted that this does not suggest that business majors will necessarily make more financially sound de cisions. Mason and Wilson (2000) defin e financial literacy a and evaluate the relevant information necessary to make decisions with an awareness of the likely financial consequences. This result simply revealed that the participants who majored in business we re more knowledgeable than non business majors in how to obtain, understand and evaluate the relevant fin ancial information with an awareness of the consequences of their decisions. Research Question 2 2. literacy level and their a) credit card debt level and b) student loan debt level? The present study found that there was no relationship between either university their credit card debt level nor between their financial literacy level and their student loan debt level. Previous r esearch conducted b y Nellie Mae (2000, 2002, 2005) and Take Charge America Institute (2007) indicated that university seniors are graduating with high student loan and consumer debt levels and recommended that higher education institution s provide more financial education co urses Though h igh debt levels have been used

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94 as evidence of financial illiteracy ( Kinzie, 2007; MacDonald, 2000; Young Americans Center for Financial Education, 2007 ) t his study revealed that university seniors financial literacy level has no relationship to their credit card or student loan debt levels. As contained in the Mason and Wilson (2000) definition financial literacy i s the individual s ability to obtain, understand and evaluate relevant fin ancial information and be aware of the consequences. The Mason and Wilson (2000) definition d oes not imply that financially literate individuals always make sound financial decisions I t simply stated that the individual must b e aware of the consequences o f financial decision s Of the graduating university seniors in this study who had student loans 51% had student loans exceeding $20,000 which is above the national average of $15,000 (American Council on Education, 2003). The reason for the possibly exc ess borrowing by these students is unknown ; it could be speculated that th e se students were simply poor and in need of the additional loan funds. This hunch however, is suspect since the university at which this study was conducted wa s not eligible for f e deral Title III financial aid. A university that is eligible for Title III view of being a low income institution. The university would have to enroll a high er percentage of low income students compared to ot her institution s nationally that are offering similar degree programs The income level of the participants of this study appears similar to the income level of students at other similar institutions nationally. F u rther research could attempt to identify m ore clearly the specific reasons for the borrowing pattern identified in this study

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95 Almost half (49%) of the graduating university seniors had credit card balances below $1,000 With the interest rate on student loans traditionally being lower than credit card interest rates it is considered a better decision to use student loans rather than credit cards. This finding suggests that students we re making a relatively sound financial decision regarding the type of debt they incur red A fairly high percentage (15%) had credit card balances that exceeded $7,500. Although the majority of the graduating undergraduates show ed a high level of fiscal responsibility the 15% with credit card balances exce eding $7,500 may be in need of personal financial management tr aining to assist in long term planning regarding reduc tion of the level of credit card debt. Debt has been commonly assumed to be negative, but in fact, not all debt is bad debt Based on the result s of the study the graduating seniors accessed more stud ent loans than credit card debt. This could be attributed to the higher level of financial literacy that was identified. Student loan debt offers better incentives (i.e. better interest rates, has longer repayment grace periods and has deferments for hards hip situations ) These benefits are not available for credit card debt. Making the choice to acquire student loan debt rather than credit card debt is an astute decision. Although the decision to use student loans over credit cards is a sound decision the level of student loan debt reported in this study w as viewed as high. Universities in the Southeastern United States a re known to be lower in cost when compared to the national average (National Center for Educational Statistics, 2006). T he university doe s not have an inordinately high percentage of low income students as suggested by the fact that the institution does not meet the federal requirements for Title III financial aid. This

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96 level of student indebtedness is a cause for concern, since the majorit y of the students having borrowed student loans carry a loan balance that is above the national average while g raduating from a university with lower costs than the national average and with their socio economic status not being significantly different fro m other similar institution s Research Question 3 3. To what degree does gender, employment status, ethnicity, family income and college major predict financial literacy levels of graduating university seniors? Gender, employment status, ethnicity, fami ly income, and college major are some of the factors shown by other researchers (Chen, Volpe, & Pavlicko, 1996; Danes & Hira, 1987; Markovich & DeVaney, 1997; Murphy, 2005 ; Thaden & Rookey, 2004). This st udy indicated that gender, employment stat us, ethnicity, and college major were supporting the findings of previous research. Based on th finding s gender, employment status, ethnicity and colleg e major can be used to predict financial literacy levels in graduating university students. K nowing that gender and ethnicity are predictors of financial literacy levels can aid in identifying persons who might benefit from personal finance assistance G ender has consistently be en identified as a factor predicting financial literacy levels. P ast studies by Chen, Volpe, & Pavlicko ( 1996 ), Danes & Hira ( 1987 ), Markovich

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97 & DeVaney ( 1997 ), Murphy ( 2005 ) and Thaden & Rookey ( 2004 ) all found that male participa nts had higher financial literacy level s than females. This finding was reaffirmed by this study wh ich also found that males had significantly higher financial literacy score than females. Males scored 76.18% compared to females with a mean financial liter acy score of 69.59%. Chen and Volpe (2002) have attempted to study this gender phenomenon affecting financial literacy scores. They postulated that the statistically significant difference in the financial literacy score of males and females could be cause d by the fact that males historically performed better in mathematical areas. This assumption seems to be the most probable explanation for the gender disparity. This factor needs to be studied further to identify what contributes to this gender difference which might lead potentially to changes in the manner in which future financial literacy educational programs are developed. Employment status was previously identified as a predictor of financial literacy levels and was also confirmed in this study. W ith the majority of the participants indicating that they learned money management from their own experiences it is understandable that employment status can be a predictor of financial literacy. Being employed opportunity to manage person al income to make financial decisions, and to have the opportunity to learn from the experience Learning from these experiences early in life could aid in developing financial literacy This study indicated that college major is also a predictor of financial literacy levels. Students majoring in b usiness had a significantly higher financial literacy level than non majors. Students majoring in b usiness study basic financial concepts are taught

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98 how to research and gather financial information learn to make a financially sound decision s and they are taught to consider the consequences of the decision Because of this it is not surprising that college major can predict of financial literacy level. Another reason for the higher financial literacy leve l of business majors could be that persons who majored in business have always had a personal interest in money matters and possibly entered the university with a high level of financial literacy. Yet another possible reason that could have contributed to the higher financial literacy level of business majors might be that a higher percentage of males majored in business. In this study it was identified that males had higher financial literacy scores than females. T his suggests that additional steps might be taken to assist non business majors in becoming more financially literate, such as offering financial literacy courses taught by College of Business faculty but publicized and offered to students across all majors Innovative methods might be taken to o ffer financial literacy courses to non business majors. T he majority of the participants in this study stated they were unaware that a personal finance course was offered at their university. The student body has to be made aware of the availability of the course so they can make better informed decision s regarding the potential personal importance of participating in the course. Ethnicity wa s another predictor of financial literacy levels. Chen, Volpe, & Pavlicko ( 1996 ), Danes & Hira ( 1987 ) and Thaden & Ro okey ( 2004 ) all found difference s in the financial literacy levels based on ethnicity. They all reported that Caucasians had higher financial literacy level s than minority groups. This study similarly found that ethnicity can be used to predi ct financial literacy leve ls. Asian

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99 Americans were the one minority group that had higher financial literacy scores than Caucasians. The majority of the participants indicat ed that they primarily learned money management from their own experience (54.84%) or at home from their families (40.86%). The difference that was identified in the financial literacy level of the Caucasians and Asian Americans compared to the other minority group s c ould be attributed to differing developmental experience. For example t heir parents may have allowed them to begin making financial decisions earlier in their lives or they may have been more frequently included in the ir deliberations If the family owned a business the participants may hav e had an active role in the financial management of the business. Future researchers could investigate potential developmental differences among students from differing ethnic groups that might later contribute to differences in financial literacy. The re sults of the study did not support family income as a predictor of financial literacy levels. Previous research has identified family income as a factor that impacts financial literacy levels. To ensure anonymity participants self reported their income le vel s which could have affected the validity of the result. Although family was not found to be a predictor of financial literacy level in this study, f urther research is needed to confirm that family income financial litera cy levels. Research Question 4 4. To what degree does gender, employment status, ethnicity, family income and college major predict the debt level of graduating university seniors?

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100 Of the five factors of gender, employment status, ethnicity, family income and college major that were examined to identify if any could predict the debt level of graduating university seniors, e thnicity was the sole factor i dentified as a predictor of debt level Once an institution is aware that one or more ethnic groups have a tendency to have higher debt burden s the institution should do all it can to reduce the possibility that their ethnic students are disadvantaged by their increased debt level. This could impact the strategies by which debt management instruction is offe red by the institution. Since students have a tendency to listen to their peers t he institution may consider recruiting student tutors or trainers of different ethnicit ies and train ing them to teach debt management fundamentals to their peers Then the t rained students can offer debt management workshops to other students either in small groups in their residence halls or to student organ izations. G ende r, employment status and college major were predictors of financial literacy levels but were not found to be predictors of debt level. As suggested previously, all students can have high debt level s both the financially literate and the financially illiterate. However, more financially literate students will better understand the financial concept s that l e d to the ir high debt level and kn o w better the extent of the consequences associated with the ir personal debt level. Being male or female d id not predispose s tudents to having a high er or low er debt level. There appears to be no gender disparity to debt b ecause both males and females accumulate debt and have the responsibility of paying off the ir accumulated debt. This study indicated n o gender specific debt management intervention is needed.

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101 An argument could be made eith er th at employed student s or une mployed student s acquir e more debt This study found that employment status was not a predictor of debt level. Both employed and unemployed students accumula te d debt and there wa s not enough of a difference in the debt level s of male students and female st udents for it to be used as a predictor of debt level. Although type of college major can be used to predict financial literacy levels it could not be used to predict debt level. Regardless of their major graduating seniors accumulated debt. There wa s no one specific major that g o t more or less indebted than another. It appears that g raduating seniors from all majors borrow and get into debt equally. This study also indicated that family income was not a predictor of debt levels. Students from l ow, middl e and high income families accumulated debt S tudents family income d id not predispose them to accumulate more or less debt than students from families in other income groupings Students of all income level have varying types of debt ; some may borrow stu dent loans to attend college while others may have balances on their credit cards. It cannot be assumed that a student with a low family income will borrow more student loan s because it is possible that the student may receive grants or scholarship s It h as been a mistake to equate student debt level with claims of widespread financial il literacy This mistake has been made by C ongress as well as popular newspapers and magazines. Numerous opinion pieces that have been published in newspapers and magazines have equated high debt level with low levels of financial

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102 literacy (Kinzie, 2007; MacDonald, 2000; Young Americans Center for Financial Education, 2007). Had Mason and Wilson (2000) definition of financial literacy was used this mistake might have been avoided Mason and Wilson (2000) did not indicate that a financially literate person would always make sound financial decisions ; their definition simply stated that the literate person would understand the consequences of their financial decision making The findings of this study indicate that the factors that can be used to predict financial literacy levels can not be used to predict debt levels. Conclusions In this study the average financial literacy score was 72.56 which wa s higher than the mean sc ore s reported in p revious studies (Danes and Hira, 1987; Volpe, Chen and Pavlicko, 1996; Chen and Volpe; 1998). However, business major s again were found to have significantly higher financial literacy score s than non business majors which i s consistent w ith prior research. While business minor students performed slightly higher than non business major s these differences in financial literacy scores were not significant Gender, employment status, ethnicity and college major were factors that could be us ed to predict financial literacy levels in this sample of graduating university students. These findings were consistent with the findings of previous research. F inancial literacy levels, however, had no impact on either credit card debt or student loan de bt. This study also indicated that gender, employment status, family income and college major were not predictor s demographic

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103 factors could be used as predictors of the financial literacy level s of this sample of graduating university students they did not predict student debt level. The findings of this study clearly indicated that student debt level can not be used as evidence of financial literacy level. Although debt level has been suggest ed as being symptomatic of low levels of financial literacy this study indicated that financial literacy level has no impact o n credit card debt level or student loan debt level. Implications National The use of debt level as evidence of financial illit eracy w as found to be an incorrect assumption This study found t hat financial literacy level was not related to credi t card debt or student loan debt. Future use of high debt level as evidence of low levels of financial literacy by C ongress, newspaper s an d magazines articles would be inaccurate and inappropriate. Many people similarly associate financial literacy with consistently making good financial decisions. A financially literate person can make either good or bad financial decisions. Once a person u nderstands the financial decision that he/she has made and the likely consequences associated with his or her decision that person is acting in a financially literate fashion There is continuous discussion in the popular press regarding financial litera cy especially the financial level of recent university graduates who have graduated with extensive student loan and credit card debt. Regrettably, relatively little prior research has been conducted on the financial literacy of university students. While n ational studies

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104 have been co mpleted on the financial literacy of high school and elementary school students it is surprising that there has not been a nation study conducted assessing the financial literacy of university stude nt s. University students wer e identified as being the most financially at risk group in a national report (U.S. General Accounting Office, 2006) This assertion, however, was made without any supporting research evidence This study has revealed that financial literacy level and stu dent debt level are unrelated constructs The ambiguity of the meaning of financial literacy often leads individuals to develop their own personal interpretation s; until a consensually agreed upon definition is developed this error will continue. The na tional associations of financial planners and administrators should work to develop a single definition for financial literacy and ensure that th is definition is used in the national arena so that the general public can more clearly understand the meaning of financial literacy Institution It is impe rative that universit ies take an active part in preparing their graduates to better obtain, understand and evaluate financial information. This study identified that students are interested in learning about personal finance with 52% indicating that they would be interested in taking a personal finance course if offered at their university; unfortunately information regarding the availability of th is course has previously not been disseminated effectively to the students. Eighty seven percent (87%) of the participants in this study were not aware that just such a personal finance course was already being offered at their institution. Thus, t he institution needs to find more creative

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105 and more effective ways of making students aware of courses that may be of interest to them. The academic advisors in non business colleges for example, could be made aware of the personal finance course and the widespread interest students have in learning about personal finance. The institution could possibly send out emails to non business students to inform them of the personal finance course. An online module could be offered for the students who prefer to enroll in online classes. The institution could also consider rev ising the personal finance course so that it could meet one of the general education requirements. This would increase student awareness of the course since it could now meet degree requirement. It should be noted that the institution where this study was conducted has recently implemented a new requirement that incom ing freshmen complete an online financial literacy module prior to their first day of attendance. This is an excellent first step but other measures have to be taken to en sure that degree seeking students who are currently enrolled have the same level of access and awareness of the online personal finance module. Personal Finance Associations One of the major problems identified in this study is the lack of a consensuall y agreed upon definition for financial literacy. Until financial literacy i s officially operationalized it will continue to be used to mean, imply and represent different things. In the absence of a clear and common definition every researcher, writer an d reporter will continue to employ his or he r own interpretation to the term The responsibility is on

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106 the different financial literacy and financial planning association s to develop a clear definition of financial literacy that will give other s a clear un derstanding of the concept. After a definition has been developed it will be easier to prepare and present information s. A clear definition gives direction, focus and guidelines that are currently lacking Fin ancial literacy programs could be developed to better incorporate critical thinking and decision making processes into their curricula Having knowledge about financial issues is not enough ; individuals need to be taught how to incorporate such knowledge i n to actual decision making process es and to similarly better understand the consequence s of the Students This study found that participants had a surprisingly high level of student loan debt well above the national avera ge despite the fact their family income s w ere not significantly lower than that of students at other similar institutions in the United States. Consequently these students will have to take personal responsibility for reducing their debt level. For example on e helpful step would be for s tudents to more closely track their spending and to identify areas where personal c ost saving measures could be implemented. Then it would be wise for these students to develop and follow a monthly budget or spending plan It would also be helpful for students to take an active part in their academic advising session s Since t he academic advisor s are responsible for hundreds of students

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107 individual student s must each ensure that they have the most effective and enriching a dvising experience. S tudent s each need to go to advising session s prepared with a listing of their specific questions concerns and interest, and then allow the advisor to guide them based on what the student has brought to the session. Implications for F uture Re search Based upon the present study using the Jump$tart questionnaire, it would also seem helpful to suggest that a new financial literacy measure be developed to allow participants to more closely explore the values, beliefs attitudes and critic al thinking skills involved in making personal financ ial decisions A large part of being financially literate are the critical thinking skills involved in the decision making process. An individuals values, beliefs and attitudes impact their decision maki ng process. In future research of this type it is also recommended t hat the chosen questionnaire be administered in class settings to increase the probability of gaining a more representative student sample Having a wider cross section of participants wi ll allow researcher s to make stronger recommendation s. The questionnaire used in this voluntary study was completed online and it may have been completed by students who shared an atypical interest in the issue of financial literacy. Further research mig ht also be replicated in universities in different regions of the United States. This study was conducted at one university in the Southeastern United States. Having a greater representation of institutions would allow researcher s to better generalize the results of the study. It would also allow the researcher to identify if there

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108 are any regional differences in financial literacy levels. The similarities or difference in the financial literacy level of students enrolled in different types of institutions could also be studied. The relationship between debt level and ethnicity should be explored further. Ethnicity is not a factor that can be changed but if there is a relationship between ethnicity and debt level it may be of interest to social scientist s and it could be helpful to the creation of debt management programs and interventions for college and university students Although everyone has a right to make own decisions, if there is a significant difference in debt level based on ethnicity po ssible sociological reasons for this difference might also be of interest Additional research should be conducted to assess the financial literacy level of students with individual majors. In this stud y all non business majors were combined. Future rese arch could investigate the financial literacy levels of student s in specific colleges, to determine if students in specific colleges have lower financial literacy levels than their student peers in other majors Th e results of the future research could imp act the manner in which personal finance course s are offered to students. Qualitative research should also be conducted with students who have been previously identified as having significant debt level to understand their reason s views and perceptions o f the debt they have acquired. The decision making process and reasons for students acquiring high debt has not yet been studied. Understanding the decision making processes will aid in the development and dissemination of financial literacy and debt manag ement programs.

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109 Additional r esearch should be conducted on the relationship between the ways student s learn personal financial management and their financial literacy level s In this study more than half of the participants learned personal financial mana gement by their own experience and an additional 40% learned it from their families. The impact that the learning of personal financial management has on financial literacy levels would aid in developing best practices in the delivery of personal financial management courses Additional research in the area of financial literacy is greatly needed. There has been limited qualitative financial literacy research, and this too is needed to aid in the development of financial literacy programs that will addres s attitudes, behavior and critical thinking. As we continue to impart financial literacy information, allowances must be made for the individuals values and beliefs which will affect how they make decisions.

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110 Reference s Anthe n s, W. L. (2004). Fin ancial illiteracy in America: A perfect storm, a perfect opportunity. Journal of Financial Service Professionals, 58 (6), 49 56. Avard, S., Manton, E., English, D., & Walker, J. (2005). The financial knowledge of college freshmen. College Student Journal, 3 9 (2), 321 339. Student Loan Survey. College on credit: How borrowers perceive their education debt. ( Nellie Mae Corporation ) Braintree, MA.: Nellie Mae. Baum, S. & Saunders, D. (1998). Life after debt: Results of t he National Student Loan Survey. ( Nellie Mae Corporation ). Braintree, MA: Nellie Mae. Becker, W (September 2007). Personal email. Braunstein, S. & Welch, C. (2002). Financial literacy: An overview of practice, research, and policy. Federal Reserve Bulletin 88 445 457. Breitbard, S. H. & Reynolds, C. G. (2003). Jump starting financial literacy. Journal of Accountancy 196(6), 56 60. Brobeck, S. (2002). Developing a national strategy to advance financial literacy Testimony before the Committee on Banking, Housing, and Urban Affairs of the United States Senate. Retrieved October 28, 2006 from, http://hsgac.senate.gov/public/_files/Testimonybrobeck.pdf

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111 Bureau of Economic Analysis (200 6) National Income and Product Accounts Table, Government current receipts and expend it ures Retrieved October 28, 2006 from, http://www.bea.gov/bea/dn/nipaweb/TableView.asp#Mid Bureau o f Economic Analysis (2006) National Income and Product Accounts Table, Savings and Investment table. Retrieved October 28, 2006 from, http://www.bea.gov/bea/dn/nipaweb/TableView.asp#Mid C December 30, 2006 from http://dictionary.cambridge.org/define.asp?key=46569&dict=CALD Center for Resp onsible Lending & Demos (2005). The plastic safety net: The reality behind debt in America. Findings from a national household survey of credit card debt among low and middle income households. Washington, DC: Center for Responsible Lending. Chen, H. & Vo lpe, R. P. (1998). An analysis of personal financial literacy among college student. Financial Services Review, 7 107 128. Chen, H. & Volpe, R. P. (2002). Gender differences in personal financial literacy among college students. Financial Services Review, 11 289 307. Collins English Dictionary. (n.d.). Online Resource. Retrieved December 30, 2007 http://www.collins.co.uk/wordexchange/Sections/DicSrchRsult.aspx?w ord=literac y Couper, M. P., Traugott, M. W. & Lamias, M. J. (2001). Web survey design and administration. Public Opinion Weekly, 65 230 253.

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112 Danes, S. M. & Hira, T. K. (1987). Money management knowledge of college students. The Journal of Student Financi al Aid, 17 (1), 4 16. Dillman, D. A. (2000). Mail and internet surveys: The tailored design method (2 nd ed.). New York: John Wiley & Sons Doherty, A., Chenevert, J, Miller, R. R., Roth, J. L. & Truchan, L. C. (1996). Developing intellectual skills. In J. G. Gaff, J. L. Ratcliff & Associates (Eds.), Handbook of the undergraduate curriculum: A comprehensive guide to purposes, structures, practices and change (pp. 170 189). San Francisco: Jossey Bass. Draut, T., Brown, A, James, L., Keest, K., Robinson, J, & Schloemer, E. (2005). The plastic safety net: The reality behind debt in America. Washington DC: Demos, Center for Responsible Lending Fair and Accurate Credit Transaction Act of 2003, H.R. 2622 108 Cong. (2003) Federal Reserve ( n.d. ). Consumer credit G19. Federal Reserve Statistical Report. Retrieved April 18, 2006 from http://www.federalreserve.gov/releases/g19/hist/cc_hist_sa.html Federal Reserve Board (n.d.). Survey of Consumer Finances. Retrieved September 3, 2007 from http://www.federalreserve.gov/pubs/oss/oss2/scfindex.html Ferguson, R. W. (2002). Speech given before the National Council on Ec onomic Education, Washington, D.C. Retrieved January 29, 2005, from http://www.federalreserve.gov/boarddocs/speeches/2002/20020513/default.htm Financial Literacy & Education Commission (2006). Taking ownership of the future: The national strategy for financial literacy. Washington D.C., Author.

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113 Financial Literacy Council, FL. HB 825 § 2006 140 (2006) (enacted). Fox, J., Bartholomae, S. & Lee, J. (2005). Building the case for financial education. The Journal of Consumer Affairs, 39 (1), 195 214. Gaff, J. G., Ratcliff, J. L. & Associates (Eds.), Handbook of the undergraduate curriculum: A comprehensive guide to purposes, structures, practices and change. San Francisco: J ossey Bass. Godfrey, N. S. (2006). Making our students smart about money. The Education Digest, March, 21 26 American Bankers Association Banking Journal, 94 (4), 47 48. Hayhoe, C. R. (2002). Compar ison of affective credit attitude scores and credit use of college students at two points in time. Journal of Family and Consumer Sciences, 94 (1), 71 77. Hayhoe, C. R., Leach, L. J., Turner, P. R., Bruin, M. J. & Lawrence, F. C. (2000). Differences in spen ding habits and credit use of college students. Journal of Consumer Affairs, 34 (1), 113 133. Higher Education Act of 1965, Pub. L. 89 329 (1965) (enacted) Hilgert, M. A. & Hogarth, J. M. ( 2003 ) Household financial management: The connection between knowle dge and behavior. Federal Reserve Bulletin, July 309 322.

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114 Hopley, V. (2003). Financial education: What is it and what makes it so important? Consumer Reinvestment Report published by the Federal Reserve Bank of Cleveland Spring, 1 12. Iannicola, D. (2004 ). Address to Wisconsin teachers and school administrators at personal finance training session and leads financial education roundtable in Madison. Retrieved January 29, 2005 from http://www.t reas.gov/press/releases/js1822.htm Immerwahr, J. (2000). Great expectations: How Floridians view higher education. National Center for Public Policy and Higher Education and Public Agenda New York. Immerwahr, J. & Foleno, T. (2000). Great expectations: How the public and parents White, African American and Hispanic view higher education National C enter for P ublic P olicy and H igher E ducation and P ublic A genda New York. Jump$tart Coalition for Personal Financial Literacy (2002) National standards in personal finance with benchmarks, applications and glossary for K 12 classrooms Washington D.C.: Author. Kaplowitz, M. D., Hadlock, T. D. & Levine, R. (2004). A comparison of web and mail survey response rates. Public Opinion Quarterly, 68 (1), 94 101. K ara A., Kaynak, E. & Kucukemiroglu, O. ( 1994). Credit card development s trategies for the youth market: The use of conjoint analysis. International Journal of Bank Marketing, 12 (6), 30 36.

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115 Kinzie, S. (March 30, 2007). Money on the line during these classe s: Colleges teach financial basics. Washington Post. Retrieved May 1, 2007 from http://www.washingtonpost.com/wp dyn/content/article/2007/03/29/AR200703290 2361.html Klemme, D. (2002). National Jump$tart Coalition for Financial Literacy Benchmarks: curriculum inclusion and pedagogical practice in Wisconsin. Journal of Family and Consumer Sciences Education, 20 (2), 12 19. L u cey, T. A. (2005). Assessing the r eliability and validity of the Jump$tart survey of financial literacy. Journal of Family and Economic Issues, 26 (2), 283 294. finding it at school. Bankrate. Retrieved Nov ember 12, 2006 from http://www.bankrate.com/brm/news/special/20000816.asp Mandell, L. (1998). Our vulnerable youth: The financial literacy of American 12 th graders Washington, DC: Jum p$tart Coalition. Mandell, L. (2004). Financial Literacy: Are we improving? Results of the 2004 national Jump$tart Coalition survey. Washington, DC: Jump$tart Coalition. Markovich, C. A. & DeVaney, S. A. (1997 Fall know ledge and practice. Journal of Family and Consumer Sciences, 65 61 65. Mason, C. L. J. & Wilson, R. M. S. (2000). Conceptualizing Financial Literacy (Business School Research Series. Paper 2000: 7). UK: Loughborough University McKenzie, V. M. (2007). [Pe rsonal finance course offering at state university in the state of Florida]. Unpublished raw data.

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116 Merriam Webster Dictionary. (n.d.) Online Resource. Retrieved on December 30, 2006 from http://www .webster.com/dictionary/literacy Murphy, A. J. (2005). Money, m oney, m oney: An exploratory study on the financial literacy of black college students. College Student Journal, 39 (3), 478 488. National Association of Student Financial Aid Administrators (NA SFAA) (2002). Aid administrators are among those testifying at senate hearing on financial literacy among college students. News from NASFAA Retrieved February 5, 2005 from http://www.nasfaa.org/publications/2002/lfinancialliteracy090902.html National Center for Education Statistics (2006). 2003 2004 National postsecondary student aid study (NPSAS:04). Undergraduate financial aid estimates for 12 states:2003 04 Washing ton, DC: U.S. Department of Education. Retrieved December 11, 2006 from http://nces.ed.gov/pubs2006/2006158.pdf Nellie Mae (2005). Undergraduate students and credit cards in 2004: An analysis of us age rates and trends. Retrieved January 17, 2006 from http://www.nelliemae.org/library/research_12.html Nellie Mae (2000 ). 2000 credit card usage analysis. Retrieved January 17, 2006 from http://www.nelliemae.com/library/research_8.html Nettles, M. T. (1995). The emerging national policy agenda on higher education assessment: A wake up call. The Review of Higher Education 18 293 313. Journal of Applied Social Psychology. 33 (5), 935 947. No Child Left Behind Act of 2001, Pub. L. 107 110, §5, 115 Stat. 1425 (2002).

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117 Norvilitis, J. M., Merwin, M. M., Osberg, T. M., Roehling, P. V., Young, P., Kamas, M. M. (2006). Personality fact ors, money attitudes, financial knowledge, and credit card debt in college students. Journal of Applied Social Psychology. 36 (6), 1395 1413. Pedhazur, E. J. (19 8 2). M ultiple regression in behavioral r e search: Explanation and prediction New York, NY: Holt, Rinehart, and Winston Porter, S. R. & Whitcomb, M. E. (2003). The impact of contact type on web survey response rates. Public Opinion Quarterly, 67 (4), 579 588. Ratcliff, J. L. (1996). Quality and coherence in general education. In J. G. Gaff, J. L. Ratcl iff & Associates (Eds.), Handbook of the undergraduate curriculum: A comprehensive guide to purposes, structures, practices and change (pp. 141 169) San Francisco: Jossey Bass. Retrieved December 30, 2006, from T http://thesaurus.reference.com/browse/literate Schaefer, D. R. & Dillman, D. A. (1998). Developm ent of a standard e mail methodology. Public Opinion Quarterly, 62 (3), 378 397. Scherschel, P. (1998). Student indebtedness: Are borrowers pushing the limits? Indianapolis,. IN: USA Group Foundation. Schumer, C. E. (2004). As college begins, students and p arents: Beware of credit card offers, hidden interest rates leave mountain of debt. Press Release. NY Retrieved January 12, 2007 from

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118 www.schumer.senate.gov/SchumerWebsite/pressroom/press_releases/2004/PR02 968.NYCCreditcards092604.html Gazette, Retrieved July 31, 2006 http://www.post gazette.com/pg/pp/06209/709216.stm Stevens, J. P. (1999). Intermediate statistics: A modern approach (4 th ed.) Mahwah, NJ: Lawrence Erlbaum Associates. Tabachnick, B. G. & Fidell, L. S. (2000). Using Multiv ariate Statistics (4 th ed.). Boston, MA: Allyn & Bacon. Thaden, L. L. & Rookey, B. D. (2004, October). Dead or alive? Paper presented at Inequalities Seminar Pullman, WA. Thaden, L. L. & Rookey, B. D. (2005, November) Financial decision making and economic inequality: Sources of influence on c Paper presented at AFCPE Annual Conference, Inequalities Seminar, Scottsdale AZ The College Board (2003). Challenging times, clear choices: An action agenda for college access and success New York, NY:Author. Retrieved December 14, 2006 from http://www.collegeboard.com/prod_downloads/about/ news_info/natdial/intro_cha llenging.pdf

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119 U.S. General Accounting Office. (2006, December). Further progress needed to ensure an effective an effective national strategy (Report No. GAO 07 100). Retrieved December 14, 2006, from http://web.lexis nexis.com/universe/printdoc Vitt, L. A. & Anderson, C. (2001). Personal finance and the rush to competence: Financial literacy in the U.S. Middleburg, VA: Fannie Mae Foundation. Volpe, R. P., Chen, H. & P avlicko, J. J. (1996). Personal investment literacy among college students: A survey. Financial Practice and Education, 6 86 94. Young Americans Center for Financial Education (2007). The state of financial literacy in America. Retrieved May 1, 2007 from http://www.yacenter.org/index.cfm?fuseAction=financialLiteracyStatistics.financi alLiteracyStatistics 2003 2004 Fact Book. Retrieved June 3, 2007 from http://usfweb2.usf.edu/bpa/factbook/fb2004/section3/default.htm 2003 2004 SUS Fact Book. Florida Department of Education. Retrieved August 7, 2007 from http://www.fldcu.org/factbook/2003 2004/pdf/t22_00_0304_f.pdf

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120 A ppendices

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121 Appendix A 200 4 JUMP$TART QUESTIONNAIRE 1. What is your gender? a) Male b) Female 2. Includin g this semesters course work how many credits of Business classes have you completed? a) 30 or more credits b) 18 or greater but less than 30 credits c) 6 or greater but less than 18 credits d) I have taken only 1 business class d) None 3. Is your major in the College of Business? a) Yes b) No 4 What type of financial aid were you offered in the 2007 2008 academic year? (Check all that apply) a) Pell Grant b) Other grants c) Scholarships d) Subsidized Stafford Loans e) Unsubsidized Stafford Lo ans f) Did not apply for financial aid 5 How do you describe yourself? a) White or Caucasian b) Black or African American c) Hispanic American d) Asian American e) Native American or American Indian f) Other 6 From which College will you be rec eiving your degree? a) Architecture & Community Design b) Arts & Sciences c) Business d) Education e) Engineering f) FMHI

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122 g) Honors h) Marine Science i) Nursing j) Undergraduate Studies k) Visual & Performing Arts 7 Whose credit card do you use? a) My own 8 How many credit cards do you have? a) 1 b) 2 c) 3 d) 4 or more 9 How do you normally make your credit card paym ent? a) I make the minimum payment b) I pay more than the minimum but not the entire balance c) I pay the entire balance b) I am not responsible for making my credit card payments 1 0 Where did you learn most about managing your money? a) At home f rom my family b) At school in class c) From talking with my friends d) From magazines, books, TV and the radio e) From experience in managing my own funds f) In my residence hall 11 Do you prepare a monthly budget? a) Yes b) No 1 2 If you prepa re a monthly budget, do you stick to it? a) Yes b) No 1 3 How would you describe your employment history? a) I work full time in the summers and part time during the school year. r.

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123 c) I work part time in the summers and part time during the school year. e) I work full time for the entire year. f) I have never been formally employed outside the home. 14 Which of the following classes have you had in high school (check all that apply)? a) An entire course in money management or personal finance. b) A portion of a course where at least a week was focused on money management or personal finance. c) An en tire course in economics. d) A portion of a course where at least a week was focused on economics. e) A course in which we played a stock market game. 15 Does your university offer a Personal Finance Course? a) Yes b) No 16 If t hey offered a Personal Finance Course would you take it? a) Yes b) No 17 Have you taken the Personal Finance Course? a) Yes b) No 1 8. Consider annual income from all sourc es before taxes. a) Equal to or less than $50,000 b) Equal to or greater than $50,000 but less than $75,000 c) Equal to or greater than $75,000 but less than $100,000 d) Equal to or greater than $100,000 but less than $125,000 e) Greater than $125,000 f g) Prefer not to respond 1 9 What is the average monthly balance that you keep on your credit card? a) Equal to less than $1000 b) More than $1000 but less than $2500 c) Equal to or more than $2500 but less than $5000 d) Equal to or more than $5000 but less than $7500 e) More than $7500

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124 h) Prefer not to respond 20 Using your best estimate what is your outstanding balance on your student loans? a) $5000 or less b) $10,000 or less but mo re than $5,000 c) $15,000 or less but more than $10,000 d) $20,000 or less but more than $15,000 e) $25,000 or less but more than $20,000 f) More than $25,000 g) I have not borrowed student loans h) Prefer not to respond 2 1 If each of the following persons had the same amount of take home pay, who would need the greatest amount of life insurance? a) A young single woman without children. b) A young single woman with two young children. c) A young married man without children. d) An elderly reti red man, with a wife who is also retired. 22 Kevin has saved $9,000 for h is college expenses by working part time. H is plan is to start college next year and she needs all of the money she saved. Which of the following is the safest place for her col lege money? a) A bank savings account b) Corporate bonds c) Stocks d) Locked in her closet at home 23 Your take home pay from your job is less than the total amount you earn. Which of the following best describes what is taken out of your total p ay? a) Federal income tax, property tax, and Medicare and social security contributions b) Social security and Medicare contributions c) Federal income tax, social security and Medicare contributions d) Federal income tax, sales tax, and social security c ontribution 24 Which of the following statements is NOT correct about most ATM (Automated Teller Machine) cards? a) You can generally get cash 24 hours a day. b) You must have a bank account to have an ATM Card. c) You can get cash anywhere in the worl d with no fee. d) You can generally obtain information concerning your bank balance at an ATM machine.

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125 2 5 Jim just found a job with a take home pay of $1,500 per month. He must pay $750 for rent and $125 for groceries each month. He also spends $100 per month on transportation. If he budgets $50 each month for clothing, $75 for restaurants and $50 for everything else, how long will it take him to accumulate savings of $700? a) 2 months b) 4 months c) 6 months d) 8 months 2 6 Inflation can cause difficulty in many ways. Which group would have the greatest problem during periods of high inflation that last several years? a) Older, working couples saving for retirement. b) Older people living on fixed retirement income. c) Young couples with n o children who both work. d) Young working couples with children. 2 7 Andrew worked his way through college earning $15,000 per year. After graduation, h is first job pays $30,000. The total dollar amount Andrew will have to pay in Federal Income taxes in his new job will: a) Double, at least, from when he was in college. b) Go up a little from when he was in college. c) Stay the same as when he was in college. d) Be lower than when he was in college. 2 8 Many savings programs are protected by the F ederal government against loss. Which of the following is not? a) A certificate of deposit at the bank b) A U. S. Treasury Bond c) A bond issued by one of the 50 States d) A U. S. Savings Bond 29 Which of the following credit card users is likely to pay the GREATEST dollar amount in finance charges per year, if they all charge the same amount per year on their cards? a) Paula, who only pays the minimum amount each month. b) Ellen, who always pays off her credit card bill in full shortly after she rec eives it. c) Barbara, who generally pays off her credit card in full but, occasionally, will pay the minimum when she is short of cash.

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126 d) Nancy, who pays at least the minimum amount each month and more, when she has the money. 3 0 If your credit card is stolen and the thief runs up a total debt of $1,000, but you notify the issuer of the card as soon as you discover it is missing, what is the maximum amount that you can be forced to pay according to Federal law? a) none b) $50 c) $1000 d) $500 3 1 S aul must borrow $10,000 to complete his college education. Which of the following would NOT be likely to reduce the finance charge rate? a) If the loan was insured by the Federal Government. b) If his parents cosigned the loan. c) If he went to a state c ollege rather than a private college. d) If his parents took out an additional mortgage on their house for the loan. 32 If you went to college and earned a 4 year degree, how much more money could you expect t o earn than if you only had a high school diploma? a) No more; I would make about the same either way. b) About 10 times as much. c) A lot more; about 70% more. d) A little more; about 20% more. 33 Many people put aside money to take care of unexp ected expenses. If Susan and Joe have money put aside for emergencies, in which of the following forms would it be of LEAST benefit to them if they needed it right away? a) Savings account b) Invested in a down payment on the house c) Stocks d) Checking account 34 Which of the following is true about sales taxes? a) The federal government will deduct it from your paycheck. b) The nationa l sales tax percentage rate is 6%. c) It makes things more expensive for you to buy. d) You don't have to pay the tax if your income is very low. 35 Rebecca has a good job on the production line of a factory in her home town. During the past year or two, the state in which Rebecca lives has been raising taxes on its businesses to the point where they are much higher than in

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127 ta x state, threatening raising wages. d) She is likely to get a large raise to offset the effect of higher taxes. 3 6 Which of the following types of investment would best protect the purchasing power of a family's savings in the event of a sudden increase in inflation? a) A twenty five year corporate bond b) A certificate of deposit at a bank c) A 10 year bond issued by a corporation d) A house financed with a fixed rate mortgage 3 7 Which of the following best describes the primary sources of income for most people age 20 35? a) Salaries, wages, tips b) Profits from business c) Dividen ds and interest d) Rents 3 8 Which of the following statements best describes your right to check your credit history for accuracy? a) You can only check your record for free if you are turned down for credit based on a credit report. b) Your credit reco rd can be checked once a year for free. c) All credit records are the property of the U.S. Government and access is only available to the FBI and Lenders. d) You cannot see your credit record. 39 Which of the following statements is true? a) If you miss ed a payment more than 2 years ago, it cannot be considered in a loan decision. b) People have so many loans it is very unlikely that one bank will know your history with another bank. c) Banks and other lenders share the credit history of their borrowers with each other and are likely to know of any loan payments that you have missed. d) Your bad loan payment record with one bank will not be considered if you apply to another bank for a loan. 40 Retirement income paid by a company is called: a) 401k b) Pension c) Social Security

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128 d) Rents and profits 4 1 If you are behind on your debt payments and go to a responsible credit counseling service such as the Consumer Credit Counseling Services, what help can they give you? a) They can work with those who loaned you money to set up a payment schedule that you can meet. b) They can cancel and cut up all of your credit cards without your permission. c) They can get the federal government to apply your income taxes to pay off your debts. d) They can force those who loaned you money to forgive all your debts. 4 2 Carla and Sara work together in the finance department of the same company and earn the same pay. Carla spends her free time taking work related classes to improve her computer skills; while Sara spends her free time socializing with friends and working out at a fitness center. After five years, what is likely to be true? a) Carla and Sara will continue to make the same money. b) Carla will make more money because she is more valuable to her company. c) Sara will make more because Carla is likely to be laid off. d) Sara will make more because she is more social. 43 Ed and Bob are young men. Each has a good credit history. They work at the same company and make approximately the same salary. Ed has borrowed $2,500 to take a foreign vacation. Bob has borrowed $2,500 to buy a car. Who is likely to pay the lowest finance charge? a) They will both pay the same because the rate is set by law. b) They will both pay the same because they have almost identical financial b ackgrounds. c) Ed will pay less because people who travel overseas are better risks. d) Bob will pay less because the car is collateral for the loan. 44 Which of the following instruments is NOT typically associated wit h spending? a) Credit card b) Cash c) Certificate of deposit d) Debit card 45 Hector and Maria just had a baby. They received money as baby gifts and want to put it away for the baby's education. Which of the following tends to have the highest growth over periods of time as long as 18 years? a) A U.S. Govt. savings bond

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129 b) Stocks c) A savings account d) A checking account 4 6 If you had a savings account at a bank, which of the following would be correct concerning the interest that you would e arn on this account? a) You cannot earn interest until you pass your 18th birthday. b) Income tax may be charged on the interest if your income is high enough. c) Sales tax may be charged on the interest that you earn. d) Earnings from savings account interest may not be taxed. 47 Ron and Molly are the same age. At age 25 Ron began saving $2,000 a year while Molly saved nothing. At age 50, Molly realized that she needed money for retirement and started saving $4,000 per year while Ron kept saving hi s $2,000. Now they are both 75 years old. Who has the most money in his or her retirement account? a) Molly, because she saved more each year b) Ron, because he has put away more money c) Ron, because his money has grown for a longer time at compound inter est d) They would each have the same amount because they put away exactly the same 48 If you have caused an accident, which type of automobile insurance would cover damage to your own car? a) Collision b) Liability c) Term d) Comprehens ive 49 Marie has just applied for a credit card. She is an 18 year old high school graduate with few valuable possessions and no credit history. If Marie is granted a credit card, which of the following is the most likely way that the credit card comp any will reduce ITS risk? a) It will start Marie out with a small line of credit to see how she handles the account. b) It will charge Marie twice the finance charge rate it charges older cardholders. c) It will require Marie to have both parents co sign f or the card. d) It will make Marie's parents pledge their home to repay Karen's credit card debt. 50 Under which of the following circumstances would it be financially beneficial to you to borrow money to buy something now and repay it with future incom e? a) When the interest on the loan is greater than the interest you get on your savings.

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130 b) When some clothes you like go on sale. c) When you really need a week vacation. d) When you need to buy a car to get a much better paying job. 5 1 Many young pe ople receive health insurance benefits through their parents. Which of the following statements is true about health insurance coverage? a) You are covered by your parents' insurance until you marry, regardless of your age. b) Young people don't need heal th insurance because they are so healthy. c) You continue to be covered by your parents' insurance as long as you live at home, regardless of your age. d) If your parents become unemployed, your insurance coverage may stop, regardless of your age.

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131 Ap pendix B Initial Email to Students Subject: Financial Literacy Survey and Informed Consent Good Day, My name is Vandeen McKenzie and I am doctoral student in the department of Adult, Career and Higher Education. I am pursuing a Doctorate of Education i n Leadership Development with a College Leadership Emphasis. You have been selected to participate in my study on The F inancial L iteracy of C ollege S tudents: A compari son of university seniors financial literacy and financial behavior A ttached is a copy of the informed consent form for you to review. By clicking on the link below you are indicating that you are freely giving your consent and you are agreeing to participate in this research If you have any questions about the research please contact th e Principal Investigator Vandeen McKenzie at vmmckenz@mail.usf.edu or 813 240 2636 http://www.surveymonkey.com/s.aspx?sm=I78ZN oPe8doRwUz8dbakbw_3d_3d Thank you for participating in the financial literacy study. Thank you, Vandeen McKenzie Principal Investigator

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132 Appendix C Follow up Email 1 Subject: Reminder to complete Financial Literacy Questionnaire Good Day, I would like to thank you if you have completed the questionnaire already and if you have not I would like to remind you that it is still active and can be accessed via the link below. Please complete the questionnaire as soon as possible if you have not done so already. http://www.surveymonkey.com/s.aspx?sm=I78ZNoPe8doRwUz8dbakbw_3d_3d Thank you, Vandeen McKenzie Primary Investigator

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133 Appendix D Follow up Email 2 Subject: Remin der to complete Financial Literacy Questionnaire Good Day, I would like to thank you if you have completed the questionnaire already and if you have not I would like to remind you that it is still active and can be accessed via the link below. Please co mplete the questionnaire as soon as possible if you have not done so already. http://www.surveymonkey.com/s.aspx?sm=I78ZNoPe8doRwUz8dbakbw_3d_3d Thank you, Vandeen McKenzi e Primary Investigator

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134 Appendix E Thank you Email Subject: Thank you for your participation Good Day, I would like to thank you for your participation in my study on the financial literacy of college students. Your response has been a valuable help in the study on financial literacy. Thank you, Vandeen McKenzie Principal Investigator

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135 Appendix F Informed Consent to Participate in Research Information to Consider Before Taking Part in this Research Study Researchers at the University of South Florida (USF) study many topics. To do this, we need the help of people who agree to take part in a research study. This form tells you about this research study. We are asking you to take part in a research study that is called: financial literacy and debt level. The person who is in charge of this research study is Vandeen McKenzie The research will be done online using Survey Monkey. Purpose of the study The purpose of this study is to access the financial literacy of college seniors to identify the impact if any that higher education has had on their levels of financial literacy. Study Procedures If you take part in this study, you will be asked to complete the Jump$tart questionnaire. The email you received contains a link to the questionnaire. The questionnaire will take no longer than 30 minutes to complete. Alternatives You have the alternative to choose not to participate in thi s research study. Benefits Risks or Discomfort There are no known risks to those who take part in this study. Compensation We will not pay you for the time you volunteer while be ing in this study

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136 Confidentiality We must keep your study records confidential. No identifying information will be collected by the questionnaire. However, certain people may need to see your study records. By law, anyone who l ooks at your records mu st keep them completely confidential. The only people who will be allowed to see these records are: The research team, including the Principal Investigator, study coordinator, and all other research staff Certain government and university people who need to know more about the study. For example, individuals who provide oversight on this study may need to look at your records. This is done to make sure that we are doing the study in the right way. They also need to make sure that we are protecting your r ights and your safety.) These include: the University of South Florida Institutional Review Board (IRB) and the staff that work for the IRB. Other individuals who work for USF that provide other kinds of oversight may also need to look at your records. the Florida Department of Health, people from the Food and Drug Administration (FDA), and people from the Department of Health and Human Services (DHHS) We may publish what we learn from this study. If we do, we will not let anyone know your name. We will not publish anything else that would let people know who you are. Voluntary Participation / Withdrawal You should only take part in this study if you want to volunteer. You should not feel that there is any pressure to take part in the study, to pl ease the investigator or the research staff. You are free to participate in this research or withdraw at any time. There will be no penalty or loss of benefits you are entitled to receive if you stop taking part in this study. Your decision to participa te will not affect your student status or course grade. Questions, concerns, or complaints If you have any questions, concerns or complaints about this study, call Vandeen McKenzie at (813) 240 2636 If you have questions about your rights, general questi ons, complaints, or issues as a person taking part in this study, call the Division of Research Integrity and Compliance of the University of South Florida at (813) 974 9343. If you experience an adverse event or unanticipated problem, call Vandeen McKenzi e at (813) 240 2636 Consent to Take Part in this Research Study It is up to you to decide whether you want to take part in this study. If you want to take

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137 part, please complete the online questionnaire via the link provided in this email.

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About the Aut hor In August 2009 Vandeen McKenzie completed an Ed.D in Educational Leadership with an emphasis in College Leadership. She has a M.A. in Counselor Education with an emphasis in Community Mental Health. Both degrees were earned at the University of South Florida (USF) She also has a B .A. in Computer and Management S tudies. She has eight years of experience in administering federal student financial aid. She has admi nistered financial aid for TRIO programs state scholarship programs athletes and gradua te students. After Hurricane Katrina she managed the processing of financial aid for displaced students and she was awarded a grant to assist the students displaced by the hurricane. During her tenure at USF she started the Students I n Free Enterprise (SI FE) team. Her main focus for the team was that they would provide financial literacy educational programs to students on campus through peer counseling and mentorship. The team continues its educational work and they have been recognized both regionally and na tionally.