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LUSARDI Annamaria - 2014 Symposium to Advance Financial Literacy

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OECD Directorate for Financial and Enterprise Affairs
OECD Directorate for Financial and Enterprise Affairs

This presentation by Annamaria Lusardi was made at the opening 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

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2nd Global Policy Research Symposium to Advance Financial Literacy Annamaria Lusardi Academic Director, Global Financial Literacy Excellence Center (GFLEC) Chair, PISA Financial Literacy Expert Group TOWARDS A MORE INCLUSIVE SOCIETY
2 2nd Policy Research Symposium to Advance Financial Literacy •This is the second Policy Research Symposium •Proceedings summarizing presentations in the first Symposium are available •New theme
3 Towards a more inclusive society •The focus of this Symposium: Building a more inclusive society •Research demonstrates that there are large differences in financial literacy •Who are the vulnerable groups? –women –lower income/lower education –immigrants, elderly –young
4 Financial knowledge among women •Very robust findings of large gender differences in financial knowledge •Women are much more likely to say “I do not know” 22% 35% 47% 33% 38% 55% 60% 51% 0% 10% 20% 30% 40% 50% 60% 70% US Netherlands Germany Canada Financial knowledge by gender (% answering 3 Qs correctly) Women Men 50% 46% 43% 47% 34% 29% 30% 28% 0% 10% 20% 30% 40% 50% 60% 70% US Netherlands Germany Canada At least one "don't know" answer, by gender Women Men
5 Financial knowledge across income groups •Financial knowledge is also strongly positively correlated to income level 14% 19% 25% 31% 38% 48% 56% 62% 0% 10% 20% 30% 40% 50% 60% 70% <$15K $15-25K $25-35K $35-50K $50-75K $75-100K $100-150K $150K+ Financial knowledge by income level in the United States (% answering 3 questions correctly)
6 Financial knowledge across education groups •Financial knowledge is strongly positively correlated to education level 10% 22% 38% 49% 65% 0% 10% 20% 30% 40% 50% 60% 70% Less than HS grad High school diploma Some college education College graduate Post-Graduate education Financial knowledge by education in the United States (% answering 3 questions correctly)
7 Financial knowledge among the young •Compared to other age groups, financial knowledge among the young is very low •Now we have 2012 PISA data on financial literacy that allows us to study financial literacy among high school students in 18 different countries 13% 22% 28% 34% 38% 38% 42% 43% 50% 55% 54% 49% 0% 10% 20% 30% 40% 50% 60% 18-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75+ Financial knowledge by age in the United States (% answering 3 questions correctly)
8 New data for 15-year-olds around the world •We have important new data •2012 Programme for International Student Assessment (PISA) •Measuring financial literacy among high school students
9 2012 PISA Financial Literacy Assessment PISA is the first large-scale international study to assess the financial literacy of 15-year-old students The PISA financial literacy assessment provided an articulated plan for developing items, designing the instrument, and providing a common language for discussion of financial literacy.
10 PISA Financial Literacy Assessment •A group of experts was convened by the OECD to design the 2012 module on financial literacy •They represented many countries and many stakeholders (treasury departments, central banks, regulators, practitioners, academics) •Experts worked on the assessment for about two years •Data was released on July 9, 2014 A multiple-year project
11 US release of PISA financial literacy data, July 9, 2014
12 What does the data say? •The data is incredibly rich and provides a lot of information that can be used by policy makers, practitioners, teachers, and parents •The data tells us a lot •Today we are also going to listen to some young people. They are the faces behind the numbers.
13 Some important findings •A lot of the variation in financial literacy is explained by socio-economic background (parent’s income and education) •We start unequal when it comes to financial literacy and inequality will only grow •How to provide equality of opportunity early in life?
14 0 2 4 6 8 10 12 14 16 18 20 Estonia Italy Russian Federation Croatia Australia Fl.Com. (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 Relationship between socio-economic status and financial literacy, mathematics, and reading performance
15 Why should we care? •Financial knowledge can be linked to behavior: saving, borrowing, investing, and retirement planning •Today, we will see that financial knowledge is also linked to wealth inequality •The paper in the afternoon session shows that financial knowledge is one of the main determinants of wealth inequality
16 The importance of research • Assessing how financial knowledge impacts wealth inequality is a hard task • Need a (new) model of saving that incorporates financial knowledge •The model needs to incorporate realistic features of the economy, such as: –Many sources of risk –Borrowing constraints –Inequality in wages
17 The importance of research (continued) Once we have such a model, it is possible to • Calculate the share of wealth inequality that is due to financial knowledge •Understand the behavior of financial knowledge over time •Assess whether policies or programs improve well- being; for example, what are the effects of adding financial literacy programs in school?
18 From research to applications What can be done to address financial literacy among the young and to address inequality? •We have received a large number of projects which have been done around the world •We want to discuss other ideas as well Borrow from other fields, for example health
19 From research to applications (continued) •Very important to share experiences •INFE is a true gateway for financial education •We are looking forward to an interactive session at the end of the Symposium −Still time to ask questions or to mention projects −Learning from each other
20 Philadelphia Los Angeles Pasadena Palo Alto Berkeley Hanover Boston Madison Northampton Paris Montreal Munich Milan Groningen Amsterdam Braga Madrid Stockholm St. Gallen Istanbul Mexico City Tianjin Turin Oxford Glasgow Sao Paulo Vienna Singapore Wellington Washington D.C. GFLEC’s Global Network: Ongoing projects around the world
Experimental Economics Psychology Business Economics Linguistics Sociology Financial Literacy Our approach is multidisciplinary
Entrepreneurs Financial Literacy Maximizing our potential through entrepreneurship
23 Thanks to our funders
24 Thank you! Annamaria Lusardi Global Financial Literacy Excellence Center (GFLEC) E-mail: alusardi@gwu.edu Blog: http://annalusardi.blogspot.com/ Twitter: @A_Lusardi

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LUSARDI Annamaria - 2014 Symposium to Advance Financial Literacy

  • 1. 2nd Global Policy Research Symposium to Advance Financial Literacy Annamaria Lusardi Academic Director, Global Financial Literacy Excellence Center (GFLEC) Chair, PISA Financial Literacy Expert Group TOWARDS A MORE INCLUSIVE SOCIETY
  • 2. 2 2nd Policy Research Symposium to Advance Financial Literacy •This is the second Policy Research Symposium •Proceedings summarizing presentations in the first Symposium are available •New theme
  • 3. 3 Towards a more inclusive society •The focus of this Symposium: Building a more inclusive society •Research demonstrates that there are large differences in financial literacy •Who are the vulnerable groups? –women –lower income/lower education –immigrants, elderly –young
  • 4. 4 Financial knowledge among women •Very robust findings of large gender differences in financial knowledge •Women are much more likely to say “I do not know” 22% 35% 47% 33% 38% 55% 60% 51% 0% 10% 20% 30% 40% 50% 60% 70% US Netherlands Germany Canada Financial knowledge by gender (% answering 3 Qs correctly) Women Men 50% 46% 43% 47% 34% 29% 30% 28% 0% 10% 20% 30% 40% 50% 60% 70% US Netherlands Germany Canada At least one "don't know" answer, by gender Women Men
  • 5. 5 Financial knowledge across income groups •Financial knowledge is also strongly positively correlated to income level 14% 19% 25% 31% 38% 48% 56% 62% 0% 10% 20% 30% 40% 50% 60% 70% <$15K $15-25K $25-35K $35-50K $50-75K $75-100K $100-150K $150K+ Financial knowledge by income level in the United States (% answering 3 questions correctly)
  • 6. 6 Financial knowledge across education groups •Financial knowledge is strongly positively correlated to education level 10% 22% 38% 49% 65% 0% 10% 20% 30% 40% 50% 60% 70% Less than HS grad High school diploma Some college education College graduate Post-Graduate education Financial knowledge by education in the United States (% answering 3 questions correctly)
  • 7. 7 Financial knowledge among the young •Compared to other age groups, financial knowledge among the young is very low •Now we have 2012 PISA data on financial literacy that allows us to study financial literacy among high school students in 18 different countries 13% 22% 28% 34% 38% 38% 42% 43% 50% 55% 54% 49% 0% 10% 20% 30% 40% 50% 60% 18-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75+ Financial knowledge by age in the United States (% answering 3 questions correctly)
  • 8. 8 New data for 15-year-olds around the world •We have important new data •2012 Programme for International Student Assessment (PISA) •Measuring financial literacy among high school students
  • 9. 9 2012 PISA Financial Literacy Assessment PISA is the first large-scale international study to assess the financial literacy of 15-year-old students The PISA financial literacy assessment provided an articulated plan for developing items, designing the instrument, and providing a common language for discussion of financial literacy.
  • 10. 10 PISA Financial Literacy Assessment •A group of experts was convened by the OECD to design the 2012 module on financial literacy •They represented many countries and many stakeholders (treasury departments, central banks, regulators, practitioners, academics) •Experts worked on the assessment for about two years •Data was released on July 9, 2014 A multiple-year project
  • 11. 11 US release of PISA financial literacy data, July 9, 2014
  • 12. 12 What does the data say? •The data is incredibly rich and provides a lot of information that can be used by policy makers, practitioners, teachers, and parents •The data tells us a lot •Today we are also going to listen to some young people. They are the faces behind the numbers.
  • 13. 13 Some important findings •A lot of the variation in financial literacy is explained by socio-economic background (parent’s income and education) •We start unequal when it comes to financial literacy and inequality will only grow •How to provide equality of opportunity early in life?
  • 14. 14 0 2 4 6 8 10 12 14 16 18 20 Estonia Italy Russian Federation Croatia Australia Fl.Com. (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 Relationship between socio-economic status and financial literacy, mathematics, and reading performance
  • 15. 15 Why should we care? •Financial knowledge can be linked to behavior: saving, borrowing, investing, and retirement planning •Today, we will see that financial knowledge is also linked to wealth inequality •The paper in the afternoon session shows that financial knowledge is one of the main determinants of wealth inequality
  • 16. 16 The importance of research • Assessing how financial knowledge impacts wealth inequality is a hard task • Need a (new) model of saving that incorporates financial knowledge •The model needs to incorporate realistic features of the economy, such as: –Many sources of risk –Borrowing constraints –Inequality in wages
  • 17. 17 The importance of research (continued) Once we have such a model, it is possible to • Calculate the share of wealth inequality that is due to financial knowledge •Understand the behavior of financial knowledge over time •Assess whether policies or programs improve well- being; for example, what are the effects of adding financial literacy programs in school?
  • 18. 18 From research to applications What can be done to address financial literacy among the young and to address inequality? •We have received a large number of projects which have been done around the world •We want to discuss other ideas as well Borrow from other fields, for example health
  • 19. 19 From research to applications (continued) •Very important to share experiences •INFE is a true gateway for financial education •We are looking forward to an interactive session at the end of the Symposium −Still time to ask questions or to mention projects −Learning from each other
  • 20. 20 Philadelphia Los Angeles Pasadena Palo Alto Berkeley Hanover Boston Madison Northampton Paris Montreal Munich Milan Groningen Amsterdam Braga Madrid Stockholm St. Gallen Istanbul Mexico City Tianjin Turin Oxford Glasgow Sao Paulo Vienna Singapore Wellington Washington D.C. GFLEC’s Global Network: Ongoing projects around the world
  • 21. Experimental Economics Psychology Business Economics Linguistics Sociology Financial Literacy Our approach is multidisciplinary
  • 22. Entrepreneurs Financial Literacy Maximizing our potential through entrepreneurship
  • 23. 23 Thanks to our funders
  • 24. 24 Thank you! Annamaria Lusardi Global Financial Literacy Excellence Center (GFLEC) E-mail: alusardi@gwu.edu Blog: http://annalusardi.blogspot.com/ Twitter: @A_Lusardi