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Education International
Education International

PISA 2012: Financial literacy deficit among students

published 11 July 2014 updated 15 July 2014

Many young people are confused by money matters, according to the 2012 Programme for International Student Assessment (PISA) released by the Organisation for Economic Cooperation and Development (OECD).

Around one in seven students in the 18 OECD countries and economies that took part in the first OECD PISA international assessment of financial literacy are unable to make even simple decisions about everyday spending, and only one in 10 can solve complex financial tasks.

Some 29,000 15-year-olds took part in the test, which assessed the knowledge and skills of teenagers in dealing with financial issues, such as understanding a bank statement, the long term cost of a loan, or knowing how insurance works.

“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, launching the report on 7 July in Paris, France, with H.M. Queen Máxima of the Netherlands, the UN Secretary General’s Special Advocate for Inclusive Finance for Development and Honorary Patron of the G20 Global Partnership on Financial Inclusion.

The report’s executive summary notes that finance is a part of everyday life for many 15-year-olds: they are already consumers of financial services such as bank accounts with access to online payment facilities. As they near the end of compulsory education, students will also face complex and challenging financial choices. One of their first major decisions may be to choose whether to continue with formal education and how to finance such study.

Financial literacy an essential life skill

Financial literacy is thus an essential life skill, and high on the global policy agenda, the report also says. Shrinking welfare systems, shifting demographics, and the increased sophistication and expansion of financial services have all contributed to a greater awareness of the importance of ensuring that citizens and consumers of all ages are financially literate.

“Some governments have started developing strategies and policies so that people have the skills they need throughout their lives,” Gurría said. “More need to move this up the policy agenda so that citizens are prepared for an ever-more complicated financial world.”

The report also adds that Shanghai-China had the highest average score in financial literacy, followed by the Flemish Community of Belgium, Estonia, Australia, New Zealand, the Czech Republic, and Poland.

Gender gap in maths

It underlines that the gender gap in financial literacy was much smaller than in OECD PISA tests in maths or reading, with no significant difference between the performance of boys and girls, except in Italy.

However, there are worrying gender differences in students’ attitudes towards mathematics, the report says: even when girls perform as well as boys in mathematics, they report less perseverance, less motivation to learn mathematics, less belief in their own mathematics skills, and higher levels of anxiety about mathematics. While the average girl underperforms in mathematics compared with the average boy, the gender gap in favour of boys is even wider among the highest-achieving students. According to the report, these findings have serious implications not only for higher education, where young women are already underrepresented in the science, technology, engineering and mathematics fields of study, but also later on, when these women enter the labour market.

Other influences

The inequality gap also mirrors that in key school subjects: more socio-economically advantaged students scored much higher than less-advantaged students on average across participating OECD countries and economies. Non-immigrant students also performed slightly better than immigrant students from a similar socio-economic status. The gap between the two groups is larger than the OECD average in the Flemish Community of Belgium, Estonia, France, Slovenia and Spain.

The survey also revealed that skills in mathematics and reading are very closely related to financial literacy. However, high proficiency in one of these subjects does not always signal strong performance in financial literacy.

Similarly, countries that perform well in maths or reading also perform well in financial literacy. 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 maths and reading. Conversely, students in France, Italy, and Slovenia perform slightly worse in financial literacy than predicted. The results are inconclusive about the best approach to improve financial literacy at this stage. The OECD is developing more research to address this question in the future.

EI: financial literacy skills help students become informed citizens and get a bright future

“Equipping citizens with the skills necessary to achieve their full potential, participate in an increasingly interconnected global economy, and ultimately convert better jobs into better lives are a central preoccupation of policy makers around the world,” EI Consultant John Bangs said.

But it is not lack of financial literacy which caused the financial crisis, it is greedy bankers whose only objective is maximum profit, he said, adding: “The OECD and others cannot blame the economic crisis on a lack of financial literacy alone‎ and ignore the fact that there was little oversight of bankers’ reckless attitudes which took us there. Indeed students should be taught about socially responsibly uses of finance including the reasons behind financial crises.”

Basic financial literacy is obviously vital and extremely wide disparities between students in different countries is disturbing, as is the fact that girls and young women fall behind their male counterparts, he went on to say.

PISA 2012 also finds that the highest-performing school systems are those that allocate educational resources more equitably among advantaged and disadvantaged schools and that grant more autonomy over curricula and assessments to individual schools, he highlighted. “We wish to reiterate that engaging all stakeholders in education – including students, parents, and trade unions – in education, teacher and school policies is a guaranteed way to achieve successful school systems.”

To read the OECD PISA report in its entirety, please click here