Alaska Trends

op quiz! A 15-year mortgage typically requires higher monthly payments than a 30-year mortgage but the total interest payments will be less. True or false?

Knowing the answer can mean the difference between saving or spending thousands of dollars for homeowners, and not knowing could discourage potential buyers from adding a home to their personal wealth. That’s why the FINRA Investor Education Foundation asks that question as part of its National Financial Capability Study. You can take the quiz online at usfinancialcapability.org and test your own financial literacy.

FINRA, the Financial Industry Regulatory Authority, is a non-government watchdog that oversees securities trading, so one of its tactics to protect the public from swindlers is, in essence, self-defense training. And, just like martial arts, although financial literacy might rarely be used against an actual aggressor, exercising the skill is part of a healthy lifestyle.

To extend the simile, Junior Achievement is a dojo for financial literacy, economics, and career (FLEC) education. However, whereas STEM (science, technology, engineering, and math) has become a focus of public school curricula, FLEC is on the periphery. It’s up to JA volunteers to bring FLEC into schools.

Yes, it’s true: a 15-year mortgage results in lower interest over the life of the loan. Anyone who answered correctly can count themselves lucky to have that level of financial literacy, whether they learned it from school, JA, or life experience. In this edition of Alaska Trends, we flex our FLEC muscles and find out who is penny wise or pound foolish.

Sources: Summary of Select Findings: Alaska; The State of U.S. Financial Capability: The 2018 National Financial Capability Study

Feeding the Economic Divide

Nationally, at schools where 75% of students are eligible for free and reduced lunch, only 3.9% of students are required to take a one-semester personal finance course. At schools with 25% of students eligible for free and reduced lunch, 10.5% were required to take a one-semester personal finance course.

clipart of teacher with dollar signs on the whiteboard and a group of orange and yellow students

Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After 1 year, how much would you be able to buy with the money in this account?

True or False? Buying a single company’s stock usually provides a safer return than a stock mutual fund.

49% Correct

The majority of Alaskans answered this question correctly: False.

Financial Literacy Counts

All financially educated graduates are 3% more likely to apply for post secondary education aid.

The expected family contribution (EFC) affects what additional benifits students gain through financial education.

An additional 9% receive subsidized loans

An additional 3% get grants

3% fewer carry a lower credit card balance

3.5% fewer students work during school

An additional 4% receive subsidized loans

Those who take out private loans borrow $2,300 less

Access & Availability

41% of Alaskans say they were offered financial education at a school, college, or workplace (regardless of participation), compared to less than a quarter in New Jersey and West Virginia.

Utah

41%

Alaska

41%

Missouri

36%

New Jersey

24%

West Virginia

22%

If you have $100 in a savings account and the interest rate is 2% per year, how much will you have in the savings account after 5 years?

Bull Riding

37% of Alaskans have invested in stocks, bonds, mutual funds, or other securities outside of retirement account vs the national average of 32%.

If interest rates rise, what will typically happen to bond prices?

A) They will rise
B) They will fall
C) They will stay the same
D) There is no relationship between bond prices and the interest rate

77% Incorrect

The majority of Alaskans asked were unable to answer this question.

50 | 50%

All 50 states plus DC include some sort of economic education in their K-12 standards. 50% require economics for graduation. Economics is not required course work for graduation in Alaska.

clipart of hexagon shapes forming the United States of America

Non-Bank Borrowing

When strapped for cash, Alaskans prefer visiting their local pawn shop to other forms of non-bank borrowing.

Auto title loan

11%

Payday loan

15%

Tax refund advance

10%

Pawn shop

19%

Rent-to-own store

11%

clipart of gaming controller attached to a screen with money

Lottery vs. Investing

Based on superficial characteristics, investing and playing the lottery are often perceived as similar. More Americans have purchased a lottery ticket than invested outside of retirement accounts. This is not surprising, given the upfront cost of participating in the lottery is $1 or $2, which is much less than typical securities investments.

Over the past 12 months, approximately how often did you buy a lottery ticket?

Almost every day

A few times a week

About once a week

About once a month

11%

Less than once a month

25%

Never

43%

Air Miles Matter

How often Alaskans compare credit cards is higher than the national rate. Chalk that up to our collection of air miles and frequent flier upgrades.

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