When it comes to matters of personal finance, America’s youth is not exactly the brightest bulb in the closet. On average, high school seniors only managed to answer 52.3% of questions about personal finance and economics correctly, a slight improvement from the 50.2% of correct answers in 2002 and 51.9% in 2000, according to an Associated Press report.

The results come from a study released by the Federal Reserve board sponsored by the Jump$tart Coalition for Personal Financial Literacy, an advocacy group that wants students to have the skills to be financially competent.

Amazingly only 52.8% of high school seniors – a group that in large part cannot apply for a credit card since they are still not 18 – said they would have no liability if their credit card was stolen and a thief ran up a $1,000 bill. Of course, anyone with at least a 9 ^th grade education would know that liability is limited to $50 after the credit-card issuer is notified, to which less than two out every 10 12 ^th graders (18.1%) correctly identified.

However if questions about credit cards teenagers were alarming, they are nothing compared to the income tax treatment of savings. A pathetic 23.9% of high school seniors knew that income tax might be charged on the interest earned from a savings account at a bank, depending upon a person’s income level. Comparatively, 52% said that earnings from savings account interest might not be taxed. Given how many high school seniors pay capital gains taxes on their investment returns every year, these results may seem surprising.

However, most appalling is complete lack of financial concepts generally reserved for discussion in college level finance classes. Only 35% of the 17 to 18 year-olds canvassed knew that a bond issued by one of the 50 states is not protected by the federal government against loss, which is better than a dismal 27.1% who answered that question correctly in the 2002 survey. Think that’s bad? Less than half (46%) correctly answered that older people living on fixed retirement income would have the greatest problem during periods of high inflation.

The future for the children of America’s youth looks bleak as well. Only 17.2% of high school seniors said that stocks likely would offer the higher growth over 18 years of saving for a child’s education, compared to 79.5% that thought a U.S. savings bond or a savings account would offer the highest growth.

Fortunately, all hope for the future is not lost. Nearly 79% were right in saying that the primary sources of income for most people age 20 to 35 are salaries, wages and tips. But salary is only half the battle, and teenagers are woefully ignorant about retirement plans at their future employers. Apparently uneducated by their provider of their retirement plan with their job at the Gas N’ Sip, only 35.1% of high school seniors correctly said that retirement income paid by a company is called a pension. However, 62.9% thought it was called Social Security or a 401(k).

So there you have it, the failure of the nation’s primary school system to properly educate America’s youth is the ultimate reason today’s retirement plan participants are unable to grasp even the simplest of retirement plan concepts. If high school seniors are indicative of most retirement plan participants, then plan sponsors need to start with the basics of personal finance before more complicated concepts, such as compounding interest or asset allocation, can be properly introduced.

Federal Reserve Chairman Alan Greenspan though does not solely blame the nation’s plan sponsors. According to the Associated Press report, Greenspan says improving basic financial education at the elementary and secondary school level would help give young people a foundation to help them avoid financial pitfalls later in life. This comes as Greenspan says the nation’s citizens, especially young people, need to get a better grip on fundamental money matters.