Students’ financial literacy: results from PISA 2015 Friday, 16 June 2017 Mexico city
The PISA financial literacy test • In 2015, a 2015, around 48 000 students were assessed in financial 2015, a 2015, a round 48 000 students were assessed in financial round 48 000 students were assessed in financial round 48 000 students were assessed in financial In In In 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 - - olds in the olds in the olds 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
Young people are already financial consumers and will soon encounter complex financial decision Some 56% of 15-year-olds in participating OECD 56% countries and economies have a bank account, 19% have a prepaid debit card 64% Some 64% earn money from some type of work activity skills to manage a bank account 31% But fewer than one in three students have the
Many young people use digital financial products Percentage of young people age 15-24 who have: Made payments online using the Internet Made a transaction using a mobile phone Australia Canada Poland Italy Slovak Republic Lithuania Brazil Peru % 0 10 20 30 40 50 60 70 80 90 Source: World Bank Global Findex, 2014
In some countries, students nearing the end of compulsory education will soon decide whether to take a student loan Percentage of 15-year-old students who perform at Level 4 and above At Level 4, students […] can make financial decisions •Percentage of students in Australia Australia at bachelor’s, Australia Australia taking into account longer- 79% master’s or doctoral levels who had a public who had a public who had a public who had a public Australia term consequences, such student loan in 2013/14 student loan student loan student loan as understanding the overall •Percentage of bachelor’s-degree students in the cost implication of paying 62% United States United States who had a public student loan United States United States student loan student loan in student loan United States back a loan over a longer 2013/14 period […]. USD • Average amount of debt Average amount of debt Average amount of debt students graduate with Average amount of debt Netherlands in the Netherlands Netherlands 18 000 Netherlands Netherlands USD Participating •Average amount of debt students graduate with Canadian in Canada Canada Canada Canada 12 000 provinces 0 10 20 30 40 50 % Source: Education at a Glance 2016
Students acquire financial skills from their parents… But up to what their parents can transmit them • On average across participating OECD countries and economies, 84% discuss money matters with their 84% parents at least once a month • Students who do so tend to perform better in financial literacy • But financial skills are strongly related to the 89 score socio-economic background of their family • Advantaged students score 89 points higher in points financial literacy than disadvantaged students
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… Consumer Consumer – but also exposes consumers to new security threats and risks of fraud that Financial Financial are compounded when low financial literacy is combined with poor digital protection and protection and skills and low cyber security awareness literacy literacy regulation regulation 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 in PISA 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
What does financial literacy mean for the lives of 15-year-olds? Balance their priority and plan •…if they go to the cinema, will they still have enough money for the bus what to spend money on fare home? Or would it be better to buy pizza and invite friends home? Remember that some of the •…a games console will need new games, a motorbike will need fuel, tyres purchases have ongoing costs and services Being alert • …Some emails that look like they came from their bank might not be to possible fraud legitimate, they should know what to do if they are not sure Knowing what risk is and what •…If their phone gets stolen, they should ask their parents if it is covered insurance is meant for by their household insurance •…they should know that if they buy a computer on credit they will have Make an informed decision to pay interest on the loan, on top of the advertised price for the about credit compute
PISA framework for financial literacy Content Processes Contexts Identifying financial Education and work Money and transactions information Planning and managing Analyse information in a Home and family finances financial context Individual Risk and reward Evaluate financial issues Apply financial knowledge Financial landscape Societal and understanding
What the results tell us?
5 research questions and a policy goal 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 across countries and within countries? students students 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 and and reading reading ? mathematics mathematics and and 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 behaviors behaviors financial financial behaviors behaviors and future expectations? � Goal : Evidence to support effective policy action
Students’ performance in financial literacy What are the needs and gaps across and within countries?
Mean financial Mean financial Mean financial Mean financial Figure IV.3.2 Figure Figure Figure IV.3.2 IV.3.2 IV.3.2 literacy literacy score literacy literacy score score score Mean performance in financial literacy 580 B-S-J-G (China) 560 Change between 2012 and 2015 540 Belgium (Flemish) Canadian provinces 30 520 Russia 20 Netherlands Australia 500 10 United States Poland 480 Italy 0 Spain 460 -10 Three-year Lithuania Slovak Republic score-point 440 -20 difference Chile -30 420 Russia Italy United States Belgium (Flemish) OECD average-7 Spain Slovak Republic Australia Poland Peru 400 Brazil 380
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