What do teens know about money?

By Andreas Schleicher, 
Director, Directorate for Education and Skills


It used to be about what to do with the babysitting money; now it’s all about trying to get the best value for money. Or is it? What do 15-year-olds really know about money matters? Can they make sensible decisions about whether to spend or save? Can they tell the difference between a financial risk and a sound investment? (For that matter, how many of the rest of us can?)

Eighteen countries participating in PISA wanted to find out. They conducted the first-ever international assessment of students’ financial literacy. The results from that survey, released today, are presented in this month’s PISA in Focus.

The financial literacy assessment, which was administered as an option in parallel to the international PISA test, was conducted among 29 000 students – representing around nine million 15-year-olds – in the participating countries and economies.

What the assessment shows is just how varied are students’ knowledge of and understanding about money matters. Across the 13 participating OECD countries and economies, only one in ten students scores at the highest financial literacy proficiency level – Level 5. These students can solve non-routine financial problems, such as calculating the balance on a bank statement, taking into account such factors as transfer fees, and can demonstrate an understanding of the wider financial landscape, including the implications of income-tax brackets. At the other end of the proficiency spectrum, 15% of students, on average, score below the baseline level of performance, Level 2. At best, these students can recognise the difference between needs and wants, make simple decisions about everyday spending, recognise the purpose of everyday financial documents, such as an invoice, and apply single and basic numerical operations (addition, subtraction or multiplication) in contexts that they are likely to have personally encountered.

Students in Shanghai-China score the highest in financial literacy, with a mean score of 603 points, 103 points above the OECD average. Students in Australia, the Flemish Community of Belgium, the Czech Republic, Estonia, New Zealand and Poland also score higher than the OECD average.

Coming on the heels of the biggest global financial crisis since the Great Depression – one felt keenly by millions of young adults who are having trouble finding work after they graduate from school – and at a time when financial products and services are becoming increasingly complex, the results show that, even in some of the countries that performed well on the assessment, there are sizeable populations of students who lack essential financial skills. That is of concern. Students who have difficulties with simple things, like assessing the long-term liabilities arising from debt, risk getting ripped off by outrageous interest rates on their credit cards. And let’s remember that one of the triggers of the global financial crisis was the corrosive mix of people living beyond their means combined with unscrupulous lending practices.

So what can we do about this? Countries approach the goal of preparing students for an ever-more complicated financial world very differently. Some have begun to introduce financial education explicitly in their school curricula, which can help strengthen the links between school and real life. But of course, other interest groups are doing that too: those who want to make sure that there is digital education to strengthen digital literacy, health education to strengthen health literacy, environmental education to strengthen environmental literacy, and so on, with the result that students often end up with mile-wide, inch-deep curricula that lack the depth on which to build solid foundations for learning. That may also explain why some of the countries where students have the greatest exposure to financial education don’t do particularly well on financial literacy – or on any of the other PISA assessments.

Other countries place their efforts squarely on strengthening students’ conceptual understanding in key areas, such as mathematics, and then expect their students to be able to apply that understanding in different contexts, including financial ones. That risks disconnecting students from the real world. But the fact that the latter group includes top performer Shanghai, whose students show higher financial literacy skills than those in any other country, even though they are rarely exposed to financial contexts in school, shows that the question of how best to develop financial literacy is still very much open to debate.

Whatever the right balance between a focus on conceptual understanding and real-life application in school curricula, the results show clearly that many students need to have higher levels of financial literacy.

PISA 2012 Results
PISA in Focus No. 41: Do 15-year-olds know how to manage money?
Press release: First OECD PISA financial literacy test finds many young people confused by money
Launch of the OECD PISA Financial literacy assessment of students, 9 July 2014, Paris
Follow on twitter:  #OECDPISA and #OECDfe

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