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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… – 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 “individualised” pensions, and more uncertain economic and job prospects due to digitalisation, technological change, globalisation

• Growing inequality

Financial literacy Consumer protection and regulation

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

Financial literacy in PISA

What does financial literacy mean for the lives of 15-year-olds?

• …if they go to the cinema, will they still have enough money for the bus

fare home? Or would it be better to buy pizza and invite friends home? Balance their priority and plan what to spend money on

• …a games console will need new games, a motorbike will need fuel, tyres

and services Remember that some of the purchases have ongoing costs

• …Some emails that look like they came from their bank might not be

legitimate, they should know what to do if they are not sure Being alert to possible fraud

• …If their phone gets stolen, they should ask their parents if it is covered

by their household insurance Knowing what risk is and what insurance is meant for

• …they should know that if they buy a computer on credit they will have

to pay interest on the loan, on top of the advertised price for the compute Make an informed decision about credit

10 20 30 40 50 60 70 80 90 100

Italy Spain United States Canadian provinces Chile Australia OECD average-10 Slovak Republic Russia Lithuania Poland B-S-J-G (China) Netherlands Belgium (Flemish)

%

Working outside school hours (e.g. a holiday job, part-time work) Working in a family business Occasional informal jobs (e.g. baby-sitting or gardening) Any work activity (working outside school hours and/or working in a family business and/or occasional informal jobs)

Some 64% of students earn money from some formal or informal work activity

Table IV.5.15 Percentage of students who receive money from:

10 20 30 40 50 60 70 80 90 100 Chile Poland Russia Italy Lithuania Slovak Republic B-S-J-G (China) Spain United States OECD average-10 Belgium (Flemish) Canadian provinces Australia Netherlands % Students holding a bank account Students holding a bank account who perform below proficiency Level 4

Often two out of three of the students who hold a bank account do not have the skills to manage such an account

Table IV.5.13b At Level 4, students can apply their understanding of complex financial concepts, interpret and evaluate financial documents such as a bank statement, and make financial decisions taking into account longer-term consequences, such as understanding the overall cost implication of paying back a loan Students who have a bank account but do not reach proficiency Level 4

• Percentage of students in Australia at bachelor’s,

master’s or doctoral levels who had a public student loan in 2013/14

79%

• Percentage of bachelor’s-degree students in the

United States who had a public student loan in 2013/14

62%

• Average amount of debt students graduate with

in the Netherlands

USD 18 000

• Average amount of debt students graduate with in

Canada

USD 12 000

In some countries, students nearing the end of compulsory education will soon decide whether to take a student loan

Source: Education at a Glance 2016

20 40 60 80 100 Australia United States Netherlands Participating Canadian provinces %

Percentage of 15-year-old students who perform at Level 4 and above

B-S-J-G (China) Belgium (Flemish) Canadian provinces Russia Netherlands Australia United States Poland Italy Spain Lithuania Slovak Republic Chile Peru Brazil

380 400 420 440 460 480 500 520 540 560 580

Mean performance in financial literacy

Mean financial literachy score

Figure IV.3.2

• 30
• 20
• 10

10 20 30 Russia Italy United States Belgium (Flemish) OECD average-7 Spain Slovak Republic Australia Poland Three-year score-point difference

Change between 2012 and 2015

420 440 460 480 500 520

Students who discuss money matters more

• ften with friends than

with parents Students who discuss money matters equally

• ften with parents and

friends Students who discuss money matters more

• ften with parents than

with friends

Score points

Relationships matter:

Financial literacy, family and friends (after accounting for social background)

Figure IV.5.2

300 350 400 450 500 550 600 650

Peru 117 Brazil 78 Chile 103 Slovak Republic 80 Lithuania 71 Spain 79 United States 97 OECD average-10 89 Italy 60 Poland 73 Australia 107 Netherlands 104 Belgium (Flemish) 110 Russia 46 Canadian provinces 77 B-S-J-G (China) 132

Score points

Wealthiest quarter (ESCS) Third quarter Second quarter Poorest quarter

Difference between students in the top quarter and students in the bottom quarter of this index

Socio-economically advantaged students score 89 points higher in financial literacy than disadvantaged students, on average across the OECD, equivalent to almost three school years

Table IV.4.11

Mean score, by quarters of the PISA index of economic, social and cultural status (ESCS)

In math 15-year-old Americans rank 30th out

• f 35 OECD countries

Financial literacy skills is more than reading and math

• 40
• 30
• 20
• 10

10 20 30 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)

Score-point difference

Students’ performance in financial literacy is lower than the performance of students with similar scores in mathematics and reading Students’ performance in financial literacy is higher than the performance of students with similar scores in mathematics and reading

Figure IV.3.12

Difference between the actual financial literacy score and the score predicted by students’ performance in mathematics and reading

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 financial literacy than students of similar socio-economic status who do not have a bank account

Figure IV.5.5

• 20

20 40 60 80 100

Slovak Republic Russia Lithuania Poland B-S-J-G (China) Chile United States OECD average-10 Italy Belgium (Flemish) Australia Spain Canadian provinces Netherlands

Score-point difference

After accounting for socio-economic status Before accounting for socio-economic status

Difference between students who have a bank account and students who do not

• 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

• utside of school hours than advantaged students

Other findings

1.00 1.50 2.00 2.50 3.00 3.50 Try to borrow money from a family member Try to borrow money from a friend Save up to buy it Not buy it Odds ratio

Level 2 or 3 Level 4 or 5

Students' financial literacy is associated with understanding the value of saving (after accounting for math and reading and social background)

Figure IV.6.2

High performing students are more than three times as likely as low-performing students in financial literacy to choose the statement "Save up to buy it" rather than "Buy it with money that really should be used for something else“, after accounting for performance in mathematics and reading and

• ther characteristics.

Financial literacy and student motivation

5 10 15 20 25 30 35 40 45 50

I want to be able to select from among the best opportunities available when I graduate I want top grades in most or all of my courses I see myself as an ambitious person I want to be one of the best students in my class I want to be the best, whatever I do

Score-point difference Before accounting for performance in other domains After accounting for performance in mathematics and reading

Financial literacy skills for all students Address the needs of low- performing students Tackle socio- economic inequalities early on Provide equal

• pportunities for

learning to boys and girls Help students make the most of available learning

• pportunities at

school Target parents at the same time as young people Provide young people with safe

• pportunities to

learn by experience

• utside of school

Evaluate the impact of initiatives in and outside of school

A multifaceted policy agenda

• Over 50 countries have or are developing a financial

education strategy that…

– recognizes the importance of financial education – including possibly through legislation – and defines its meaning and scope – involves the co-operation of different stakeholders as well as the identification of a coordinating body – establishes a roadmap to achieve specific and predetermined

• bjectives within a set period of time

– provides guidance for individual programmes in order to efficiently and appropriately contribute to the national strategy

National strategies for financial education

• Several countries started introducing financial literacy

elements in the school curriculum into existing subjects, built teacher capabilities and developed instructional materials

• Some examples for evaluating financial education in

school (Brazil, Italy, Spain, US)

Initiatives in school

• Videos, competitions, interactive tools, events (money

weeks, savings day), museums, serious games

…complementary to school initiatives …can reach out-of-school young people … participation of non-profits and private sector can bring resources, but also up-to-date experience on financial issues …needs to be integrated in national strategies

Out of school initiatives

Find out more about our work at www.oecd.org/pisa

– All publications – The complete micro-level database

Email: Andreas.Schleicher@OECD.org Twitter: SchleicherOECD Wechat: AndreasSchleicher

Thank you