The first large-scale international assessment of financial literacy among 15-year olds found that only one in 10 can understand more-complex financial tasks and concepts, and that one in seven can’t make even basic everyday spending decisions.
The survey conducted by the Organization for Economic Co-operation and Development (OECD) examined 29,000 15 year olds in 18 countries (Canada was not included) to assess their financial knowledge and skills, such as whether they can understand a bank statement, figure out the long-term cost of a loan, or know how insurance works. It reports that, in the 13 countries that belong to the Paris-based OECD, only 10% of students score at the highest financial literacy proficiency level.
“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,” it notes.
Conversely, the 15% of students that rank at the bottom in financial literacy are unable to make even simple financial decisions. “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),” it says.
The report found no real gender difference, with boys and girls showing similar skills in financial literacy in 17 of the 18 countries. However, it notes that among students with comparable performance in mathematics and reading, boys perform better than girls in financial literacy in 11 out of 18 countries.
By country, Shanghai-China had the highest average score in financial literacy, the reports says, followed by the Flemish community of Belgium, Estonia, Australia, New Zealand, the Czech Republic and Poland. The U.S. came in below average, and Columbia, Italy and the Slovak Republic ranked at the bottom.
The survey also found that more socio-economically advantaged students scored much higher on average than students that are economically worse off; and, that non-immigrant students also performed slightly better than immigrant students with similar socio-economic status.
The OECD says that the survey also revealed that while proficiency in math and reading is very closely related to financial literacy, high scores in one of these subjects does not always signal strong performance in financial literacy.
Generally, countries that perform well in math or reading also perform well in financial literacy, it notes. But Australia, the Czech Republic, Estonia, the Flemish community of Belgium and New Zealand score slightly higher in financial literacy than predicted by their performance in math and reading, it reports. Conversely, students in France, Italy and Slovenia perform slightly worse in financial literacy than predicted.
The OECD says that it’s too early to identify the best approach to improving financial literacy, but that it is developing more research to address this question in the future.
“Developing financial literacy skills and knowledge is critical now that individuals are becoming increasingly responsible at an ever earlier age for financial risks affecting their future,” said OECD secretary-general, Angel Gurría. “Some governments have started developing strategies and policies so that people have the skills they need throughout their lives. More need to move this up the policy agenda so that citizens are prepared for an ever-more complicated financial world.”