1 in 6 US Students Lack Basic Financial Literacy
Among 29,000 15 year olds in 18 countries and regions, US students' financial literacy scores ranked a middling ninth on the PISA, a global assessment administered every three years by the Organisation for Economic Co-operation and Development (OECD).The PISA tests students' science, math and reading skills and measures their ability to apply them using open-ended and multiple-choice questions designed to mimic 'real-life' situations.
Initially administered in 2000, 2012 was?the first time that financial literacy skills were tested in the assessment. Other key?findings?released earlier this month include:
- Students' math and financial literacy scores were highly correlated—and US students had average scores in both areas
- Financial literacy scores for US students ranked below students in Shanghai-China, Estonia, Poland, Australia, and the Czech Republic
- On average, students' earned more points on questions that assessed their ability to evaluate financial issues and apply financial knowledge and understanding than they earned on questions measuring their ability to identify financial information and analyze information in a financial context
- More than 1 in 6 US students, or 17.8%, did not reach 'baseline proficiency' in financial literacy indicating that their skills were limited to understanding basic concepts, such as recognizing the difference between needs and wants, and knowing the purpose of an 'everyday' financial document (e.g., an invoice)
These results not only illustrate US students' weaker grasp of financial literacy-related topics compared to their international peers, but they also highlight the possibilities for strengthening students' financial literacy skills by incorporating financial concepts into other subject area curricula. For example, applying math skills to financial topics would likely strengthen skills in both areas.
What can be done to improve students' performance on the PISA? Recent research, including work published this year by Prosperity Now, has uncovered positive impacts on youths' financial knowledge and behavior from the integration of financial education into elementary school classrooms. Financial habits and norms established during childhood influence our financial behaviors as adults. Therefore, teaching children financial skills at a young age is critical. Financial education matters for everyone - and the more hands-on lessons are tied to real financial decisions, the better.