By Jason Alderman
Financial Literacy and U.S. Teens: Global Study Offers Path for Improvement
A first-time global financial literacy study shows that the keys to successful personal finance education are student perseverance and an openness to problem solving.
That’s one of the main findings in the inaugural financial literacy portion of the Program of International Student Assessment (PISA) test, which evaluated the skills and knowledge of 29,000 15-year-olds in 18 countries and economies in 2012. Final results were released in September, and PISA officials announced that the assessment of financial literacy will be offered as an optional component in 2015 testing.
U.S. students earned an average score of 492 out of a possible 700, which ranks those teens between eighth and twelfth place among all 18 participating countries and economies, according to the PISA study. Other findings from the U.S. results:
About one in 10 U.S. students is a top performer – 9.4 percent, compared with 9.7 percent across OECD countries. The report said this means they can “look ahead to solve financial problems or make the kinds of financial decisions that will be only relevant to them in the future.” It added that top performers “can take into account features of financial documents that are significant but unstated or not immediately evident, such as transaction costs, and can describe the potential outcomes of financial decisions.”
More than one in six U.S. students – 17.8 percent, compared with 15.3 percent across OECD countries – do not reach the “baseline level of proficiency in financial literacy.” The report explained that “at best, these students can recognize the difference between needs and wants, can make simple decisions on everyday spending and can recognize the purpose of everyday financial documents such as an invoice.”
Countries with students who scored better than their U.S. counterparts seem dedicated to a nationwide, mandatory personal finance curriculum, though most programs have not been in place for very long.
The top scorer, Shanghai-China, has a history of placing financial education topics in its national curriculum that dates back to the 1970s, according to the report.
In America, more teens could improve their financial literacy if states chose to require mandatory personal finance training as a requirement for high school graduation. The Council for Economic Education reported that as of 2014, only 17 states required students to take a high school course in personal finance or that personal finance be included in an economics or civics course as a graduation requirement. The Jump$tart Coalition for Personal Financial Literacy reported that only four states (Missouri, Tennessee, Utah and Virginia) require at least a one-semester course devoted to personal finance.
Bottom line: The results from the first-ever global high school financial literacy test show that organized and systemwide personal finance training helps students excel at money management.