NEW YORK, Feb. 26, 2013 /PRNewswire/ -- America may rank among the planet's wealthiest countries, but so many of its citizens have a poor grasp on managing their personal finances. Improvement of the nation's financial literacy is clearly necessary. In a new McGraw-Hill Research Foundation white paper, "The Challenge of Financial Numeracy: Requisite Mathematical Reasoning for Financial Literacy," author Michael Lee argues that the heart of the problem is an inability of many people to apply basic principles of quantitative reasoning in the financial decision-making process.
Lee believes that a critical distinction must be made between prosaic numeracy and what he calls financial numeracy. Financial numeracy is an important subset of financial literacy. While prosaic numeracy is a necessary starting point, financial numeracy then employs the tools of prosaic numeracy and applies them in a personal finance context. Without financial numeracy and the quantitative reasoning that accompanies it, functional financial literacy would not be possible.
Lee advocates for the inclusion of greater financial training in the grade school and the high school curricula. Lee also calls for increased collaboration among schools, the private sector, and nonprofit institutions to improve financial numeracy in children and adults alike. He points to organizations which are in the forefront of advancing the nation's financial literacy, including the Jump$tart Coalition for Personal Financial Literacy, the National Endowment for Financial Education, the National Financial Educators Council and the Council for Economic Education.
Lee believes that improving the nation's financial numeracy would go a great distance toward helping Americans better manage their personal finances, which ultimately will help return the U.S. economy to its growth path. "By teaching quantitative reasoning early in life, Americans can become empowered and use the skills they have learned in order to make sound financial decisions later in life," he writes.
Michael Justin Lee, CFA is a lecturer in the Department of Finance and in The Center for East Asian Studies at the University of Maryland. He is a past university senator and recipient of one of the Robert H. Smith School of Business' highest teaching honors. A veteran chartered financial analyst and examination grader for the CFA Institute, he served in the administration of United States Secretary of Labor Elaine Chao as financial markets expert-in-residence from 2003 to 2005. Professor Lee received his undergraduate degree at Brown University and his graduate education at New York University, completing an MBA in finance with Beta Gamma Sigma honors. He is the author of The Chinese Way to Wealth and Prosperity: 8 Timeless Strategies for Achieving Financial Success.
To download a copy of "The Challenge of Financial Numeracy: Requisite Mathematical Reasoning for Financial Literacy," click here.
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SOURCE McGraw-Hill Research Foundation