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PISA Students’ Financial Literacy - Results from PISA 2015

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Wednesday 24 May 2017 Financial Literacy and Education Commission - Washington DC

In 2015, around 48 000 students were assessed in financial literacy, representing about 12 million 15-year-olds in the schools of the 15 participating countries and economies

Students in countries and economies that participated in the 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).

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PISA Students’ Financial Literacy - Results from PISA 2015

  1. 1. Students’ financial literacy: results from PISA 2015 Andreas SCHLEICHER
  2. 2. The PISA financial literacy test • In 2015, around 48 000 students were assessed in financial literacy, representing about 12 million 15-year-olds in the schools of the 15 participating countries and economies • Students in countries and economies that participated in the 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
  3. 3. 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, like student loans 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%
  4. 4. 0 10 20 30 40 50 60 70 80 90 Peru Brazil Chile Lithuania Russian Federation Slovak Republic China Italy Belgium Poland Spain Canada Netherlands Australia United States 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: %
  5. 5. • 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
  6. 6. 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
  7. 7. 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
  8. 8. 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
  9. 9. 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. 10. 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
  11. 11. 0 10 20 30 40 50 60 70 80 90 100 Italy Spain UnitedStates Canadianprovinces Chile Australia OECDaverage-10 SlovakRepublic 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:
  12. 12. 0 10 20 30 40 50 60 70 80 90 100 Chile Poland Russia Italy Lithuania SlovakRepublic B-S-J-G(China) Spain UnitedStates OECDaverage-10 Belgium(Flemish) Canadianprovinces 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
  13. 13. Students using basic financial products or earning from work 0 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 a prepaid debit card but no bank account Student has a bank account but no prepaid debit card Student has both a bank account and a prepaid debit card Student earns money from a work activity
  14. 14. • 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 0 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
  15. 15. Countries vary in how well they prepare students for the financial world …and in how quickly they improve outcomes
  16. 16. B-S-J-G (China) Belgium (Flemish) Canadian provinces Russia Netherlands Australia United StatesPoland 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 0 10 20 30 Russia Italy UnitedStates Belgium(Flemish) OECDaverage-7 Spain SlovakRepublic Australia Poland Three-year score-point difference Change between 2012 and 2015
  17. 17. -30 -25 -20 -15 -10 -5 0 5 10 15 Lithuania SlovakRepublic Poland Australia Spain Brazil OECDaverage-10 Netherlands Canadianprovinces Peru Russia Belgium(Flemish) UnitedStates Chile B-S-J-G(China) Italy Before accounting for performance in other subjects After accounting for performance in mathematics and reading Few gender differences in mean scores… Figure IV.4.4 Score-pointdifference Girls perform better Boys perform better Gender differences in financial literacy may be related to different opportunities 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
  18. 18. 0 10 20 30 40 50 60 Peru Brazil Lithuania Chile SlovakRepublic Spain Italy Poland Russia UnitedStates OECDaverage-10 Australia Netherlands Canadianprovinces Belgium(Flemish) B-S-J-G(China) Boys Girls …but more boys than girls are low performers Figure IV.4.5 0 10 20 30 40 50 60 Boys Girls Studentsbelow Level2 Studentsat Level5 % %
  19. 19. Relationships matter Parents have a significant role, but not all parents can play this role
  20. 20. 420 440 460 480 500 520 Students who discuss money matters more often with friends than with parents Students who discuss money matters equally often with parents and friends Students who discuss money matters more often with parents than with friends Scorepoints Relationships matter: Financial literacy, family and friends (after accounting for social background) Figure IV.5.2
  21. 21. 1.0 1.5 2.0 2.5 3.0 3.5 SlovakRepublic Russia Italy Poland Brazil Lithuania Spain Canadianprovinces OECDaverage-10 Chile UnitedStates Peru Netherlands Australia Belgium(Flemish) Oddsratios Increased likelihood of socio-economically disadvantaged students to be low performers in financial literacy Even after looking at students with similar math and reading performance, disadvantaged students are about twice as likely as advantaged students to be low performers Table IV.4.25a
  22. 22. 300 350 400 450 500 550 600 650 Peru117 Brazil78 Chile103 SlovakRepublic80 Lithuania71 Spain79 UnitedStates97 OECDaverage-1089 Italy60 Poland73 Australia107 Netherlands104 Belgium(Flemish)110 Russia46 Canadianprovinces77 B-S-J-G(China)132 Scorepoints 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 than disadvantaged students, on average across the OECD, equivalent to more than one PISA proficiency level Table IV.4.11 Mean score, by quarters of the PISA index of economic, social and cultural status (ESCS)
  23. 23. Financial literacy skills is more than reading and math -40 -30 -20 -10 0 10 20 30 40 Lithuania Spain SlovakRepublic Poland Chile Italy OECDaverage-10 Netherlands Brazil Australia UnitedStates Peru Canadianprovinces Russia Belgium(Flemish) B-S-J-G(China) Score-pointdifference 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
  24. 24. 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
  25. 25. 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 0 20 40 60 80 100 SlovakRepublic Russia Lithuania Poland B-S-J-G(China) Chile UnitedStates OECDaverage-10 Italy Belgium(Flemish) Australia Spain Canadianprovinces Netherlands Score-pointdifference 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
  26. 26. Students who receive pocket money for doing chores at home, those who earn money from part-time jobs or in a family business score lower in financial literacy Students who receive gifts of money score higher in financial literacy. Gifts may be related to higher financial literacy if they provide an occasion for students to think about their saving and spending decisions, but also if high-performing students receive money as a reward for school performance Sources of money and financial literacy
  27. 27. • 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 Other findings
  28. 28. Financial literacy and forward-looking thinking On average across countries, high-performing students are more than three times as likely as students without baseline financial skills to say they would save rather than buy the item anyway Hypothetical spending behavior is not associated with gender and only weakly with social background
  29. 29. 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 Oddsratio 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 other characteristics.
  30. 30. Financial literacy and student motivation 0 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
  31. 31. Financial literacy skills for all students Address the needs of low- performing students Tackle socio- economic inequalities early on Provide equal opportunities for learning to boys and girls Help students make the most of available learning opportunities at school Target parents at the same time as young people Provide young people with safe opportunities to learn by experience outside of school Evaluate the impact of initiatives in and outside of school A multifaceted policy agenda
  32. 32. • 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 objectives 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
  33. 33. • 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
  34. 34. • 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
  35. 35. 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

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