This presentation by Flore-Anne Messy was made at the first session of the 2nd OECD-GFLEC Global Research Symposium to Advance Financial Literacy on 6 November 2014, which addressed cutting-edge policy issues and research ideas to advance the global financial literacy agenda. Find out more at http://www.oecd.org/daf/fin/financial-education/oecd-infe-gflecsymposiumfinancialliteracy.htm

1. OECD EMPLOYER BRAND
Playbook
1
PISA 2012
Students and Money
Financial literacy skills for the 21st Century
HIGHLIGHTS of
FINDINGS

2. What is PISA? What is Financial Literacy? CONTEXT AND DEFINITION

3. PISA in brief
•Over half a million students…
–representing 28 million 15-year-olds in 65 countries/economies
… took an internationally agreed 2-hour test…
–Goes beyond testing whether students can reproduce what they were taught…
… to assess students’ capacity to extrapolate from what they know and creatively apply their knowledge in novel situations
–Mathematics, reading, science, problem solving, financial literacy
… and responded to questions on…
–their personal background, their schools and their engagement with learning and school
•Parents, principals and system leaders provided data on…
–school policies, practices, resources and institutional factors that help explain performance differences .
Financial literacy: 29 000 students in 18 countries/economies took a two hour paper test on financial literacy, mathematics and reading
3

4. PISA Financial literacy -definition
PISA has developed the first international framework for
financial literacy. It defines financial literacy for youth as:
“Knowledge and understanding of financial concepts
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”.
4

5. 5
Examples of what this might mean for 15 year olds
•…if they go to the cinema, will they still have enough money for the bus fare home?
Balance their priority and plan what to spend money on
•… a motorbike will need fuel and tyres and services and an insurance coverage.
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
5

6. Why does financial literacy matter to 15-year-olds? RELEVANCE

7. Big decisions start early: such as continuing education vs working
Shrinking welfare systems; increased personal responsibility
Shifting demographics- increased longevity
Changing labour-markets and reduced job security
Access to financial products at young ages
Increasingly complex financial markets
Relevance of financial literacy for 15-year-olds
7

8. 0
20
40
60
80
Shanghai-China
Croatia
Spain
Italy
Latvia
OECD average-13
Estonia
France
Slovak Republic
Israel
Russian Federation
Slovenia
United States
Czech Republic
Flemish Community (Belgium)
Australia
New Zealand
Most students receive money from some type of work (PISA data)
…such as a holiday job, part-time work, or from working in a family business, or from occasional
informal jobs (e.g. baby-sitting or gardening) (%)
Students earning money outside of school hours
8

9. 0
20
40
60
80
100
Poland
Slovak Republic
Israel
Italy
Croatia
Czech Republic
Latvia
United States
Shanghai-China
OECD average-13
Spain
Flemish Community (Belgium)
France
Australia
Estonia
New Zealand
Slovenia
Percentage of students with a bank account
Many students have a bank account (PISA data)
9

10. 0
10
20
30
40
50
60
70
80
China
Russian Federation
Czech Republic
Estonia
Slovak Republic
Poland
OECD average
Germany
Australia
United States
Belgium
New Zealand
Isreal
Italy
Spain
France
2010 or latest available year
1970 or first available year
Their decisions today may impact on their future : Do they recognise the importance of saving for the long-term?
Source: OECD Factbook 2013: Economic, Environmental and Social Statistics - © OECD 2012
Life expectancy is high, and growing. Young people today will need to be
able to support themselves for many years
10

11. What is in the PISA financial literacy assessment? THE FRAMEWORK AND ITEMS

12. 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
PISA financial literacy multidimensional assessment framework
12

13. http://www.oecd.org/pisa/test/
Take 5 questions from the test yourself
13

14. 14
Sara receives this invoice in the mail
Sample Question: INVOICE
This is an easy item – Level 1 on the financial literacy
scale (below baseline)
Difficulty: 360
The task is to recognise the purpose of an invoice
Content: Money and transactions
Process: Identify financial information
INVOICE Question 1
Why was this invoice sent to Sarah?
A. Because Sarah needs to pay the money to Breezy Clothing.
B. Because Breezy Clothing needs to pay the money to Sarah.
C. Because Sarah has paid the money to Breezy Clothing.
D. Because Breezy Clothing has paid the money to Sarah.
14

15. 15
NEW OFFER
Mrs Jones has a loan of 8000 zeds with FirstZed Finance. The annual interest rate on the loan is 15%. Her repayments each month are 150 zeds.
After one year Mrs Jones still owes 7400 zeds.
Another finance company called Zedbest will give Mrs Jones a lona for 10 000 zeds with an annual interest rate of 13%. Her repayments each month would also be 150 zeds
NEW OFFER- Question 1
If she takes the Zedbest loan, Mrs Jones will immediately pay off her existing loan.
What are two other financial benefits for Mrs Jones if she takes the Zedbest loan?
1. …………………………………………………………………………………………………
2. …………………………………………………………………………………………………
Sample Question: NEW OFFER
Question type: Constructed response Description: Recognise positive consequences of transferring a loan to a lower interest rate Content: Planning and managing finances Process: Analyse information in a financial context Difficulty: Full credit: 663 (Level 5); Partial credit: 510 (Level 3)
15

16. Describing performance levels
Level 5
Level 4
Level 3
Level 2
Level 1 or below
Financial literacy Performance levels
Top performers
Baseline
•Apply understanding of a wide range of financial terms and concepts to contexts that may only become relevant to their lives in the long term.
•Analyse complex financial products and take into account features of financial
•documents that are significant but unstated or not immediately evident.
•Work with a high level of accuracy and solve non-routine financial problems
•Describe the potential outcomes of financial decisions, showing an understanding of the wider financial landscape, such as income tax.
•Apply understanding of less common financial concepts and terms to contexts that will be relevant to them as they move towards adulthood (e.g. bank account management and compound interest in saving products).
•Interpret/ evaluate a range of detailed financial documents
•Explain the functions of less commonly used financial products.
•Make financial decisions taking into account longer-term consequences
•Apply understanding of commonly used financial concepts, terms and products to situations that are relevant to them.
•Begin to consider the consequences of financial decisions
•Make simple financial plans in familiar contexts.
•Interpretate a range of financial documents
•Begin to apply knowledge of common financial products, terms and concepts.
•Recognise the value of a simple budget.
•Make financial decisions in contexts that are immediately relevant
•They show an understanding of relationships such as the amount something is used and the costs incurred (such as running a car).
•Identify common financial products and terms
•Interpret information relating to basic financial concepts.
•Recognise the difference between needs and wants; make simple decisions
•Recognise the purpose of everyday financial documents such as an invoice
16

17. How well prepared are young people to make complex financial decisions? THE RESULTS

18. Strong performance in financial literacy
Low performance in financial literacy
Average performance of 15-year-olds in financial literacy
18
Shanghai-China
Flemish Community (Belgium)
Estonia
Australia
New Zealand
Czech Republic
Poland
Latvia
United States
France
Russian Federation
Slovenia
Spain
Croatia
Israel
Slovak Republic
Italy
Colombia
375
385
395
405
415
425
435
445
455
465
475
485
495
505
515
525
535
545
555
565
575
585
595
605
Mean score

19. 15%
23%
30%
22%
10%
OECD average-13
Distribution of student performance
625 and
above
550 to
<625
475 to
<550
400 to <475
Less than 400 points
Financial literacy performance levels
Top performers
Baseline
19

20. Wide skill gaps within countries…
190
290
390
490
590
690
Colombia
Slovak Republic
Israel
Italy
France
United States
Slovenia
Croatia
Spain
Russian Federation
OECD average-13
New Zealand
Latvia
Poland
Czech Republic
Australia
Estonia
Flemish Community (Belgium)
Shanghai-China
Difference 75th and 25th
5th
95th
20

21. United States
Poland
New Zealand
Estonia
Croatia
Latvia
Slovak Republic
Czech Republic
France
Australia
Israel
Spain
Slovenia
Colombia
Russian Federation
Italy
R² = 0.1632
370
390
410
430
450
470
490
510
530
550
9 000
14 000
19 000
24 000
29 000
34 000
39 000
44 000
49 000
Score points
Per capita GDP (USD converted using PPPs), 2010 or the latest year
GDP per capita explains only 16% of the country level variation in financial literacy
Differences only partially explained by GDP per capita
21

22. How equitably are learning opportunities distributed? GROUPS TO BE TARGETED

23. Are there gender differences in financial literacy?
Italy
350
400
450
500
550
600
650
350
400
450
500
550
600
650
Girls' mean score
Boys' mean score
Boys perform better than girls
Girls perform better than boys
17
22
28
22
11
14
24
32
22
8
0
10
20
30
40
Level 1
and below
Level 2
Level 3
Level 4
Level 5
Girls
Boys
OECD analysis on adults finds that men outperform women. PISA indicates that among 15 year-olds, on average there are no gender differences (except in Italy) but there are fewer girls at the top and the bottom
Policies should aim to enhance girls abilities and support underperforming boys
23

24. 0
2
4
6
8
10
12
14
16
18
20
Estonia
Italy
Russian Federation
Croatia
Australia
Flemish Community
(Belgium)
Poland
Shanghai-China
Colombia
Latvia
Czech Republic
OECD average-13
Israel
Spain
France
Slovenia
United States
Slovak Republic
New Zealand
Financial literacy
Mathematics
Reading
Percentage of variation in performance
explained by socio-economic status
Socio-economic status matters and in some countries more than for mathematics or reading
24

25. -40
-20
0
20
40
60
80
100
France 13
Flemish Community (Belgium) 10
Slovenia 8
Spain 11
Estonia 10
Czech Republic 2
OECD average-13 11
Italy 7
Russian Federation 10
New Zealand 27
United States 22
Croatia 12
Israel 17
Latvia 3
Australia 20
Statistically significant
Not statistically significant
Percentage of immigrant students
Difference between the scores of non-immigrant students and immigrant students (not accounting for other factors)
Students without an immigrant background perform better than those who are 1st or 2nd generation migrants
25

26. 400
450
500
550
600
650
Shanghai-China
Flemish Community…
Estonia
New Zealand
Australia
Poland
Czech Republic
Latvia
OECD average-13
Croatia
Spain
Russian Federation
United States
Slovenia
Slovak Republic
Israel
Italy
Colombia
Students attending schools located in a village, hamlet or rural area (fewer than 3 000 people)
Students attending schools located in a city (100 000 or more
Students attending school in rural locations do less well than those in urban locations
Mean scores of students in schools in different locations
26

27. How do students develop financial literacy skills ? IMPORTANCE OF READING AND MATHEMATICS AS FOUNDATION SKILLS RELEVANCE OF EXPERIENCE AND ATTITUDES TO DEVELOP THE SKILLS

28. Israel
Colombia
Shanghai-China
Latvia
United States
OECD average-13
Croatia
Poland
Slovak Republic
Spain
Estonia
Flemish Community (Belgium)
New Zealand
Russian Federation
Australia
Czech Republic
France
Italy
Slovenia
-30
-20
-10
0
10
20
30
%
Mathematics and reading are foundations of financial literacy but the situation is uneven across countries
Students' performance in financial literacy is higher than their expected performance in mathematics and reading
28
Students' performance in financial literacy is lower than their expected performance in mathematics and reading

29. -25
-15
-5
5
15
25
35
45
55
65
75
Slovak Republic
Latvia
Italy
Croatia
Israel
Shanghai-China
Czech Republic
Spain
United States
Australia
Poland
France
OECD average-13
Estonia
Flemish Community (Belgium)
Slovenia
New Zealand
Learning financial literacy through experience: Relevance of bank account holding (accounting for socio-demographics)
On average across OECD countries and economies, students who hold a bank account score 21 points higher than students with similar socio-economic
status who do not.
29

30. 0
10
20
30
40
50
60
70
80
90
Estonia
Shanghai-China
Flemish Community (Belgium)
Croatia
Latvia
Russian Federation
Poland
Czech Republic
Italy
Slovak Republic
Spain
Israel
OECD average-13
Slovenia
Australia
Colombia
France
New Zealand
United States
Score-point difference: Students who disagree minus students
who agree with the statement
"When confronted with a problem, I give up easily"
Attitude such as perseverance matters
30

31. -5
0
5
10
15
20
25
30
35
40
45
50
Colombia
Czech Republic
Poland
Israel
Flemish Community (Belgium)
Shanghai-China
Croatia
Italy
Slovak Republic
Latvia
OECD average-13
Spain
Russian Federation
Australia
Estonia
United States
Slovenia
France
New Zealand
Statistically significant
Not statistically significant 2
Openness to problem solving is also important
Score-point difference: Students who agree minus students who
disagree with the statement "I like to solve complex problems"
31

32. •This first PISA financial Literacy assessment revealed important gaps in the financial literacy skills of students in most countries and room for improvement in all
•It however does not provide a definitive answer as to what model works best to strengthen financial literacy
•More research and future PISA exercises will be instrumental in further exploring and gauging countries’ practices and policies.
The bottom line and next steps
32

33. Thank you! Find out more about PISA at www.pisa.oecd.org All national and international publications The complete micro-level database Find out more about the OECD financial education work at www.financial-education.org OECD publications, data and instrument Global of financial education initiatives and research #oecdFE Email: Flore-Anne.Messy@oecd.org Pablo.zoido@oecd.org