Royal role models of financial education

Apart from low levels of financial literacy, OECD’s PISA report shows a gender gap that occurs after leaving school

The PISA report Students and Money. Financial Literacy Skills for the 21st Century, the first international survey of financial skills among students, revealed strikingly low levels of financial literacy in many of the 18 countries that participated. Thirteen of these were OECD member countries.

Fifteen percent of students do not have a basic understanding of financial affairs, meaning they can, at best, differentiate between needs and wants or solve simple tasks such as identifying the purpose of an invoice, according to the survey, which was part of the Programme for International Student Assessment (PISA).

On the other hand, strong financial performance is rare. Across the 13 OECD countries, only one in ten students can analyze complex financial products and shows an understanding of the wider financial landscape.

While this confirms findings of financial literacy surveys conducted among adult populations, the PISA results also reveal that the gender gap discernible among adult men and women is not present among 15 year olds. Only Italian boys perform marginally better than Italian girls.

Yet, a gender gap becomes present at a certain point after age 15. “Women are often less exposed to finance, which leads to lower levels of literacy and confidence,” according to Flore-Anne Messy, Executive Secretary of the International Network on Financial Education. However, the findings among 15 year olds and adults have to be compared with care, she warns. “PISA measured applied knowledge. Among adults, what has been examined is the level of knowledge.”

While speaking to PROJECT M at the launch event of the survey results, Messy said she recommends providing women with successful role models and connecting financial topics to the challenges of daily life to help motivate women to become more financially knowledgeable.

ROYAL SUPPORT

This could be a job description for Queen Máxima of the Netherlands. As part of her role as UN special advocate for inclusive finance, she was present at the release of the PISA report in Paris. “The results will prove to be a game changer that will provide the impetus for action in many countries,” she said.

Three out of four Dutch people are not aware of their retirement situation, according to the queen. Trained in economics with experience in banking, she called for more research into financial literacy. “It is not a question of teaching, but actually changing behavior,” Queen Máxima said. Yet how that goal can best be achieved is still a matter of debate among experts.

Angel Gurría, Secretary-General of the OECD, said, “The report paints a highly worrying picture of the level of financial literacy among students.” Only one in 10 students across participating OECD countries is able to tackle the hardest financial literacy tasks, such as calculating the impact of inflation on savings.

Among the 29,000 students who participated in the survey, those in the Shanghai region of China had the highest average score in financial literacy, followed by the Flemish community in Belgium, as well as Estonia, Australia and New Zealand. The Slovak Republic, Italy and Columbia were at the lower end of the OECD’s financial literacy scale.

FREEZING THE PICTURE

One of the main findings of the PISA research is the influence of socio-economic background on students’ performance. Lower levels of education, lower household wealth and immigrant status negatively affected students’ financial competencies. “This is bad news as it contributes to freezing the picture. With regard to the wider PISA results, the better education systems break the relationship with parents’ socio-economic status,” says Gurría.

A student’s capabilities in finance are also impacted by urban or rural settings. “In most countries, villagers do worse,” said Messy.

Reading and mathematical skills, as measured by PISA, are closely related to capabilities in financial literacy. However, strong performance in one does not always indicate good results in the other. Australia, the Czech Republic, Estonia, Belgium and New Zealand scored slightly higher in financial literacy than one would have expected from their overall PISA results. French, Italian and Slovenian students performed worse in financial literacy than expected.

For Queen Máxima, PISA’s results may be cause for concern, but they also fill a gap in the understanding of financial literacy. She said: “By measuring what you have, you can take action.”

Videos and presentations of the PISA release in the US can be viewed here.

Royal role models of financial education

Apart from low levels of financial literacy, OECD’s PISA report shows a gender gap that occurs after leaving school

Royal role models of financial education

Apart from low levels of financial literacy, OECD’s PISA report shows a gender gap that occurs after leaving school

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