By Claudia Buck - cbuck@sacbee.com
Last Updated 10:50 am PDT Tuesday, May 13, 2008
Story appeared in BUSINESS section, Page D1

Are you smarter than the average 12th-grader? Try this quick financial IQ test:

1. Which of the following tends to have the highest growth over long periods, say 18 years?

a) A checking account.
b) Stocks.
c) A U.S. savings bond.
d) A savings account.

2. At age 25, Mary began saving $2,000 a year. At age 50, Rob started saving $4,000 a year. They now are both age 75. Who has more money saved for retirement?

a) They each have the same amount.
b) Rob, because he saved a bigger amount each year.
c) Mary, because her money grew for a longer time at compound interest.

If you correctly answered "b" and "c," you did better than most of the nation's high school seniors, according to a recent survey by the JumpStart Coalition on Personal Financial Literacy, based in Washington, D.C.

About 50 percent of high school seniors answered the second question correctly. Barely 17 percent got the first one right. On other questions about credit card debt, savings and retirement, the vast majority of 12th-graders didn't score so well. Overall, high school seniors managed to correctly answer only 48.3 percent of the 31 questions.

Such results nag at financial experts, lawmakers and others who are ramping up efforts to better educate students on financial matters. The cause has taken on increasing urgency, given rising rates of bankruptcy, foreclosures and other signs of economic distress.

"If we'd had more people in this country who are financially literate, we'd have mitigated some of the mortgage meltdown," said Assemblyman Ted Lieu, D-Torrance, who's pushing Assembly Bill 2123, to establish a Financial Services Corps of volunteers in low- and middle-income communities to teach the basics on auto, home and other consumer loans - in Spanish, English, Chinese, Vietnamese and Korean.

Lieu's bill, whose fate will be decided May 22 in the Assembly Appropriations Committee, would also launch a consumer Web site of financial literacy resources and create an advisory committee in the state controller's office to promote financial literacy statewide.

Lieu, who has unsuccessfully pushed two previous bills on financial literacy in schools, says this time he's going broader - and cheaper.

"To not have people financially literate is a recipe for disaster," said Lieu, a lawyer and former investment adviser, who's hoping this bill, which relies largely on volunteers and a Web site, will pass muster in a tight budget year.

Elsewhere, financial literacy efforts are continuing toampup nationwide. This week, high school teachers are being asked to give their seniors an online test gauging their financial readiness, part of an initiative by the new President's Advisory Council on Financial Literacy. Launched in January, the federal council - whose chairman is financial services company founder Charles Schwab - seeks to gauge students' financial readiness and dangle rewards to those who do well.

On other fronts, there have been efforts in Congress this year to increase funding for personal finance training. And public libraries have stepped in, like the Sacramento Public Library, which just launched a new online financial resource, "Money- Smart@yourlibrary," which features tips from book authors, nonprofits, state agencies and others.

Last month, at the California Financial Literacy Summit in Sacramento, hundreds of financial experts, teachers and nonprofit groups zeroed in on a common denominator: getting kids prepared for the real world.

"This generation is going to emerge with so manymore big issues: things like funding their own retirement, paying for their own health care. They're illequipped to handle those issues, unless it's taught," said Jean Chatzky, a New York-based personal finance author and consultant to "The Oprah Winfrey Show." "Whether it's a full semester or a one-week crash course, something would better than nothing."

And Chatzky, a mother of two, says financial education should start sooner, at least in junior high "when kids start to want high-ticket items," like expensive sneakers or the latest portable media player.

She and others advocate making personal finance mandatory in schools.

"There should be a high school exit exam on personal finance," said Janet Ulmer, a retired Bella Vista high school teacher in Sacramento. Ulmer believes students should be taught the basics on apartment rental contracts, sharing finances with roommates, saving for major purchases - "even how much you'll pay for that Xbox if you buy it on credit."

Although a handful of states require a personal finance class to graduate from high school, California is not one of them, a fact that Lieu says puts the state "in the Dark Ages."

Because of budget constraints, state Superintendent of Public Instruction Jack O'Connell said he's "reluctant" to push personal finance as mandatory. Instead, he says, "these concepts need to be imbedded in our existing curriculum."

A year ago, O'Connell launched an online library on the Department of Education's Web site, which lists numerous - and mostly free - money-management sources for K-12 students, teachers and parents.

Having these financial conversations at home isn't always possible, especially when so many adults are mired in debt. For many parents, talking about finances with their kids "is just as hard as having the birds-andbees conversation," said Jason Alderman, who oversees Web sites and financial tools for high school and college students for Visa, the financial card company.

Indeed, a Charles Schwab Parents & Money survey released earlier this year found that while 70 percent of parents had taught their kids how to do laundry, only 34 percent had taught them how to balance a checking account. Fewer still - 19 percent - had explained how to invest money to make it grow.

That's why O'Connell and others believe financial literacy has to be a communitywide effort, noting recent initiatives by banks, credit unions, credit card companies and others.

Although the push for personal financial literacy has taken on a new resonance with the wobbly economy, it isn't exactly a new idea. As proof, Lieu dug up this 220-year-old quote from a former president and founding father, John Adams:

"All the perplexities, confusion and distress in America arise, not from defects in their Constitution,...not from want of honor or virtue, so much as from the downright ignorance of the nature of coin, credit and circulation."

Says Lieu, "It looks like little has changed since 1787."