Students’ financial literacy: results from PISA 2015 Wednesday 24 May 2017 Financial Literacy and Education Commission Washington DC Andreas SCHLEICHER
Globalisation and digital technologies have made financial products and services more widely accessible but also more challenging • More challenging financial choices – The spread of digital financial services opens up new opportunities for financially excluded people to access the formal financial system… – but also exposes consumers to new security threats and risks of fraud that are compounded when low financial literacy is combined with poor digital skills and low cyber security awareness • More financial risks – Increased life expectancy, less welfare protection, more “individualized” pensions, and more uncertain economic and job prospects due to digitalization, technological change, globalization • Growing inequality
Financial education is a complement to financial consumer protection, inclusion and regulation • More challenging financial choices – The spread of digital financial services opens up new opportunities for financially excluded people to access the formal financial system… Consumer – but also exposes consumers to new security threats and risks of fraud that Financial are compounded when low financial literacy is combined with poor digital protection and skills and low cyber security awareness literacy regulation • More financial risks – Increased life expectancy, less welfare protection, more “ individualised ” pensions, and more uncertain economic and job prospects due to digitalisation, technological change, globalisation • Growing inequality
Financial literacy in PISA Knowledge and understanding of financial concepts and risks… …and the skills, motivation and confidence to apply such knowledge and understanding… …in order to make effective decisions across a range of financial contexts, to improve the financial well-being of individuals and society, and to enable participation in economic life
What does financial literacy mean for the lives of 15-year-olds? Balance their priority and plan •…if they go to the cinema, will they still have enough money for the bus what to spend money on fare home? Or would it be better to buy pizza and invite friends home? Remember that some of the •…a games console will need new games, a motorbike will need fuel, tyres purchases have ongoing costs and services Being alert • …Some emails that look like they came from their bank might not be to possible fraud legitimate, they should know what to do if they are not sure Knowing what risk is and what •…If their phone gets stolen, they should ask their parents if it is covered insurance is meant for by their household insurance •…they should know that if they buy a computer on credit they will have Make an informed decision to pay interest on the loan, on top of the advertised price for the about credit compute
Table IV.5.15 Some 64% of students earn money from some formal or informal work activity Percentage of students who receive money from: Working outside school hours (e.g. a holiday job, part-time work) 100 Working in a family business 90 Occasional informal jobs (e.g. baby-sitting or gardening) 80 Any work activity (working outside school hours and/or working in a family business and/or occasional informal jobs) 70 % 60 50 40 30 20 10 0 Italy Spain United States Canadian provinces Chile Australia OECD average-10 Slovak Republic Russia Lithuania Poland B-S-J-G (China) Netherlands Belgium (Flemish)
Table IV.5.13b Often two out of three of the students who hold a bank account do not have the skills to manage such an account Students holding a bank account At Level 4, students can Students holding a bank account who perform below proficiency Level 4 apply their understanding of 100 complex financial concepts, 90 interpret and evaluate 80 financial documents such as 70 a bank statement, and make 60 financial decisions taking into 50 account longer-term 40 consequences, such as 30 understanding the overall 20 cost implication of paying 10 back a loan 0 Chile Poland Italy Lithuania B-S-J-G (China) Spain United States Australia Netherlands Russia Slovak Republic OECD average-10 Belgium (Flemish) Canadian provinces % Students who have a bank account but do not reach proficiency Level 4
In some countries, students nearing the end of compulsory education will soon decide whether to take a student loan Percentage of 15-year-old students who perform at Level 4 and above • Percentage of students in Australia at bachelor’s, 79% master’s or doctoral levels who had a public Australia student loan in 2013/14 • Percentage of bachelor’s -degree students in the 62% United States who had a public student loan in United States 2013/14 USD • Average amount of debt students graduate with Netherlands in the Netherlands 18 000 USD Participating • Average amount of debt students graduate with in Canadian 12 000 Canada provinces 0 20 40 60 80 100 % Source: Education at a Glance 2016
Mean financial Figure IV.3.2 literachy score Mean performance in financial literacy 580 B-S-J-G (China) 560 Three-year Change between 2012 and 2015 540 score-point Belgium (Flemish) Canadian difference provinces 30 520 Russia 20 Netherlands Australia 500 10 United States Poland 480 Italy 0 Spain 460 -10 Lithuania Slovak Republic 440 -20 Chile -30 420 Russia Italy United States Belgium (Flemish) OECD average-7 Spain Slovak Republic Australia Poland Peru 400 Brazil 380
Relationships matter: Figure IV.5.2 Financial literacy, family and friends (after accounting for social background) 520 Score points 500 480 460 440 420 Students who discuss Students who discuss Students who discuss money matters more money matters equally money matters more often with friends than often with parents and often with parents than with parents friends with friends
Socio-economically advantaged students score 89 points higher Table IV.4.11 in financial literacy than disadvantaged students, on average across the OECD, equivalent to almost three school years Mean score, by quarters of the PISA index of economic, social and cultural status (ESCS) 650 Wealthiest quarter (ESCS) 600 550 Score points Third quarter 500 In math 15-year-old Second quarter 450 Americans rank 30 th out 400 Poorest quarter of 35 OECD countries 350 300 B-S-J-G (China) 132 Canadian provinces 77 Russia 46 Belgium (Flemish) 110 Netherlands 104 Australia 107 Poland 73 Italy 60 OECD average-10 89 United States 97 Spain 79 Lithuania 71 Slovak Republic 80 Chile 103 Brazil 78 Peru 117 Difference between students in the top quarter and students in the bottom quarter of this index
Figure IV.3.12 Financial literacy skills is more than reading and math Difference between the actual financial literacy score and the score predicted by students’ performance in mathematics and reading 40 Students’ performance in 30 financial literacy is higher than the performance of Score-point difference 20 students with similar scores in mathematics and reading 10 0 Students’ performance in -10 financial literacy is lower -20 than the performance of students with similar scores -30 in mathematics and reading -40 Lithuania Spain Slovak Republic Poland Chile Italy OECD average-10 Netherlands Brazil Australia United States Peru Canadian provinces Russia Belgium (Flemish) B-S-J-G (China) Highest performing countries/economies
Learning by doing Students develop financial and economic understanding, skills and habits not only through talking to parents and observing their behaviour, but also via personal experiences and learning by doing
On average, students who hold a bank account perform better in Figure IV.5.5 financial literacy than students of similar socio-economic status who do not have a bank account Difference between students who have a bank account and students who do not After accounting for socio-economic status Before accounting for socio-economic status 100 Score-point difference 80 60 40 20 0 -20 Slovak Republic Russia Lithuania Poland B-S-J-G (China) Chile United States OECD average-10 Italy Belgium (Flemish) Australia Spain Canadian provinces Netherlands
Other findings • Boys are more likely than girls to be involved in regular work activities, and to receive money in exchange for work, while girls in some countries and economies are more likely than boys to receive money in the form of allowances or gifts • Socio-economically advantaged students are more likely to receive money from occasional informal jobs, such as babysitting or gardening, and from gifts than disadvantaged students. Disadvantaged students are more likely to earn money by working outside of school hours than advantaged students
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