Students financial literacy: results from PISA 2015 Friday, 16 June - - PowerPoint PPT Presentation

Students’ financial literacy: results from PISA 2015

Friday, 16 June 2017 Mexico city

The PISA financial literacy test

• In

In In In 2015, a

2015, a 2015, a 2015, around 48 000 students were assessed in financial round 48 000 students were assessed in financial round 48 000 students were assessed in financial round 48 000 students were assessed in financial literacy, representing about 12 million 15 literacy, representing about 12 million 15 literacy, representing about 12 million 15 literacy, representing about 12 million 15-

• year

year year year-

• olds in the
• lds in the
• lds in the
• lds in the

schools of the 15 participating countries and economies schools of the 15 participating countries and economies schools of the 15 participating countries and economies schools of the 15 participating countries and economies

• Students in countries and economies that participated in the

Students in countries and economies that participated in the Students in countries and economies that participated in the Students in countries and economies that participated in the financial literacy answered financial literacy answered financial literacy answered financial literacy answered

– a two-hour combination of tasks in science, reading and mathematics – A one-hour test in financial literacy (43 items) after the core assessment – Questions about their experience with money such as discussing money matters with parents, basic financial products and sources of money (through a ‘money management questionnaire’) … in addition to the standard questions about their personal background

Some 56% of 15-year-olds in participating OECD countries and economies have a bank account, 19% have a prepaid debit card

Young people are already financial consumers and will soon encounter complex financial decision

Some 64% earn money from some type of work activity

56% 64%

But fewer than one in three students have the skills to manage a bank account 31%

10 20 30 40 50 60 70 80 90 Peru Brazil Lithuania Slovak Republic Italy Poland Canada Australia

Made payments online using the Internet Made a transaction using a mobile phone

Many young people use digital financial products

Source: World Bank Global Findex, 2014

Percentage of young people age 15-24 who have:

%

• Percentage of students in Australia

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

79%

• Percentage of bachelor’s-degree students in the

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

62%

• Average amount of debt

Average amount of debt Average amount of debt Average amount of debt students graduate with in the Netherlands Netherlands Netherlands Netherlands

USD 18 000

• Average amount of debt students graduate with

in Canada Canada Canada 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

10 20 30 40 50 Australia United States Netherlands Participating Canadian provinces %

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

At Level 4, students […] can make financial decisions taking into account longer- term consequences, such as understanding the overall cost implication of paying back a loan over a longer period […].

• On average across participating OECD countries and

economies, 84% discuss money matters with their parents at least once a month

• Students who do so tend to perform better in

financial literacy

Students acquire financial skills from their parents… But up to what their parents can transmit them

• But financial skills are strongly related to the

socio-economic background of their family

• Advantaged students score 89 points higher in

financial literacy than disadvantaged students

84%

89 score points

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 Financial literacy Consumer protection and regulation 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

PISA framework for financial literacy Content

Money and transactions Planning and managing finances Risk and reward Financial landscape

Processes

Identifying financial information Analyse information in a financial context Evaluate financial issues Apply financial knowledge and understanding

Contexts

Education and work Home and family Individual Societal

What the results tell us?

1. What are the current needs and gaps in financial literacy of needs and gaps in financial literacy of needs and gaps in financial literacy of needs and gaps in financial literacy of students students students students across countries and within countries? 2. What are the main factors main factors main factors main factors explaining the wide inequalities wide inequalities wide inequalities wide inequalities within country? 3. Is financial literacy only about mathematics mathematics mathematics mathematics and and and and reading reading reading reading ? 4. What are students’ current experiences with money matters experiences with money matters experiences with money matters experiences with money matters ? Is it related to financial literacy? 5. How is financial literacy related to students’ financial financial financial financial behaviors behaviors behaviors behaviors and future expectations? Goal : Evidence to support effective policy action

5 research questions and a policy goal

Students’ performance in financial literacy

What are the needs and gaps across and within countries?

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 Mean financial Mean financial Mean financial literacy literacy literacy literacy score score score score

Figure Figure Figure Figure IV.3.2 IV.3.2 IV.3.2 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

Figure Figure Figure Figure IV.3.6 IV.3.6 IV.3.6 IV.3.6

13 22 22 13 19 20 20 20 22 22 25 32 35 38 48 53 33 11 24 22 17 15 6 8 10 12 6 4 6 3 1 3

80 60 40 20 20 40 60 80 100 B-S-J-G (China) Russia Belgium (Flemish) Canadian provinces Netherlands Australia Italy Poland United States OECD average-10 Spain Lithuania Slovak Republic Chile Peru Brazil

Students’ financial literacy by proficiency levels

%

BANK ERROR - Evaluate a potential financial fraud and respond appropriately to a financial scam e-mail message – Level 5 INVOICE Question 2 - Identify a delivery cost that is explicitly stated on an invoice – Level 2 INVOICE Question 1 – Recognise the purpose of an invoice - Below Level 2 PAY SLIP - Read a pay slip and recognise that the employer will only pay net salary into the employee’s bank – Level 4 INVOICE Question 3 (partial credit) - Interpret various elements on the same invoice to correct a mistake in the billing – Level 3

Variation within each country is wider than the variation between countries at the mean

Figure Figure Figure Figure IV.4.1 IV.4.1 IV.4.1 IV.4.1

Percentage of students at various percentiles on the financial literacy scale

200 300 400 500 600 700 B-S-J-G (China) 312 Canadian provinces 295 Netherlands 312 OECD average-10 285 Poland 262 Spain 265 Slovak Republic 311 Peru 276 25th - 10th percentile 50th - 25th percentile 75th - 50th percentile 90th - 75th percentile Score-point difference between 90th and 10th

Varying opportunities to improve students’ financial literacy

What are the main factors (gender, socio-economic and immigrant background) explaining the wide inequalities within country?

• 30
• 25
• 20
• 15
• 10
• 5

5 10 15

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

Before accounting for performance in other subjects After accounting for performance in mathematics and reading

In most countries/economies there are no differences in financial literacy between boys and girls at the mean…

Figure Figure Figure Figure IV.4.4 IV.4.4 IV.4.4 IV.4.4

Score-point difference Girls perform better Girls perform better Girls perform better Girls perform better Boys perform better Boys perform better Boys perform better Boys perform better Gender differences in financial literacy may be related different

• pportunities for

learning, different contexts in which men and women grow up and live, and to a possible variation of these factors across generations.

Difference between boys and girls

10 20 30 40 50 60

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

Boys Girls

… but in 9 countries and economies out of 15, more boys than girls are low performers

Figure Figure Figure Figure IV.4.5 IV.4.5 IV.4.5 IV.4.5

10 20 30 40 50 60 Boys Girls Students below Students below Students below Students below Level 2 Level 2 Level 2 Level 2 Students at Students at Students at Students at Level Level Level Level 5 5 5 5 % %

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

Top quarter of ESCS Third quarter of ESCS Second quarter of ESCS Bottom quarter of ESCS Difference between students in the top quarter and students in the bottom quarter

• f this index

Socio-economically advantaged students score 89 points higher than disadvantaged students, on average across OECD, equivalent to more than one PISA proficiency level

Table Table Table Table IV.4.11 IV.4.11 IV.4.11 IV.4.11

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

440 450 460 470 480 490 500 510 Never or hardly ever Once or twice a month Once or twice a week Almost every day Score points

Parents play a role in developing their children’s financial literacy not

• nly through the resources that they make available to them but also

through direct engagement

Figure IV.5.1 Figure IV.5.1 Figure IV.5.1 Figure IV.5.1

Mean score, by students’ answers to the question: “How often do you discuss money matters (e.g. talk about spending, saving, banking, investment) with your parents?” Discussing money matters with parents at least sometimes is associated with higher financial literacy than never discussing the subject, after accounting for students’ socio- economic status But discussing very

• ften may mean

something else….

Is financial literacy only about mathematics and reading?

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Russia 45 Brazil 47 Slovak Republic 48 Italy 52 Canadian provinces 53 Lithuania 58 Spain 58 OECD average-10 62 Poland 62 Chile 62 Peru 68 B-S-J-G (China) 69 United States 70 Belgium (Flemish) 70 Netherlands 71 Australia 71

Variation uniquely associated with mathematics performance Variation uniquely associated with reading performance Variation associated with more than one domain Variation uniquely captured by the financial literacy assessment

Total explained variation

Student performance in financial literacy is correlated with performance in mathematics and reading, but around 38% of the score reflects factors that are uniquely captured by the financial literacy assessment

Table IV.3.10a Table IV.3.10a Table IV.3.10a Table IV.3.10a

Financial literacy skills may go beyond or fall short of the ability to use the knowledge that students acquired in compulsory education

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

Figure Figure Figure Figure IV.3.12 IV.3.12 IV.3.12 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

What are students’ current experiences with money matters ? Are these related to financial literacy?

10 20 30 40 50 60 70 80 90 100 Netherlands Australia Canadian provinces Belgium (Flemish) OECD average-10 Italy United States Spain B-S-J-G (China) Russia Slovak Republic Lithuania Chile Poland %

Student has both a bank account and a prepaid debit card Student has a bank account but no prepaid debit card Student has a prepaid debit card but no bank account Student earns money from a work activity

Many students hold basic financial products or earn money from work

Figure Figure Figure Figure IV.2.1 IV.2.1 IV.2.1 IV.2.1

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 Figure Figure Figure IV.5.5 IV.5.5 IV.5.5 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

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 Table Table Table IV.5.13b IV.5.13b IV.5.13b 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

Financial literacy and financial decisions

How is financial literacy related to students’ financial behaviors?

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Slovak Republic Belgium (Flemish) Italy Poland Lithuania OECD average-10 Canadian provinces Netherlands Spain Australia B-S-J-G (China) United States Russia Chile

Not buy it Save up to buy it Try to borrow money from a friend Try to borrow money from a family member Buy it with money that really should be used for something else

Most students would save if they want to buy something for which they do not have enough money

Figure Figure Figure Figure IV.6.1 IV.6.1 IV.6.1 IV.6.1

Percentage of students who gave the following replies to the question: “Likelihood of students' response to the question “If you don’t have enough money to buy something you really want (e.g. an item of clothing, sports equipment) what are you most likely to do?”

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

Figure Figure Figure Figure IV.6.2 IV.6.2 IV.6.2 IV.6.2

High performing students are more than twice 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.

What do the results mean for policy?

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

• 10 out of the 15 participating countries and economies

are implementing a national strategy for financial education specifically addressing young people among their target audiences: … Australia, Brazil, Canada, Italy, the Netherlands, the Russian Federation, Spain, Peru and the United States .. And over 65 countries these days

National strategies for financial education

• Several countries started introducing some financial literacy

elements in the school curriculum into existing subjects (Australia, Brazil, Flemish Community of Belgium, Lithuania, Peru, Slovak Republic, Spain – Canada and the United states, depending on province/state) … but to what extent is the curriculum implemented?

• Some examples of evaluation of financial education

programmes in school (Brazil, Italy, Russia, Spain, US) …is it effective? evaluation needs to become systematic

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 to be monitored …again their impact needs to be evaluated more regularly

Out of school initiatives

• Continue to collect and share evidence on policy

effectiveness through the OECD/International Network on Financial Education (INFE)

• PISA 2018 financial literacy: 21 countries

Australia, Brazil, Bulgaria, Canada, Chile, Estonia, Finland, Georgia, Indonesia, Italy, Latvia, Lithuania, Netherlands, Peru, Poland, Portugal, Russian Federation, Serbia, Slovak Republic, Spain, United States

• Possibility of a further assessment in 2021

Next steps

www.oecd.org/finance/financial-education Flore-Anne.Messy@oecd.org SecretariatINFE@oecd.org and remember: Without Without Without Without data, you are just data, you are just data, you are just data, you are just another person with an opinion another person with an opinion another person with an opinion another person with an opinion

Thank you Muchas Gracias

Find out more about our work at www.oecd.org/pisa All publications and the complete micro-level database