The OECD PISA test measures the capabilities of 15 year olds in maths, reading and science every three years across 65 countries, including USA. The test also compares teens’ performance on financial issues all over the world. According to its findings, less than 30% of American teens are able to understand their paycheck and one in 6 American teens are able to make everyday decisions regarding money. The American university is the most expensive in the world and student debts are a crippling national issue. Anybody fancying a correlation?
American teens are financial illiterates compared to Shanghai teens
At the top of the list were Shanghai, Estonia and the Flemish Community of Belgium, whereas at the bottom of it you could find Colombia, The Slovak Republic and Italy.
America falls behind other countries when it comes to being able to determine which amount someone will be awarded from their theoretical income, only 28.8% indicated the correct answer, compared t o 74.8% students from Shanghai.
Financial literacy was measured using a range of questions varying in complexity, from those covering recognition of an invoice up to more difficult problem-solving questions, such as choosing between two loans.
Because more than 17.8% of them do not have some basic level of monetary skills and competencies, according to their answers from the financial test of PISA, American teens are financial illiterates, compared to other OECDr countries, with a mean of 15.3% of teens who do not reach that basic financial literacy. The explanation for Shanghai students’ performance lies within the structure of their educational system, where early difficulties in teen performance is dealt with stages of institutional intervention and correction that keeps students from falling behind, a strategy that American educational system lacks. Moreover, in USA there is strong correlation between financial status and overall PISA test performance on financial literacy, showing a strong gap in access to education between the poor and the middle income teens. Not surprinsingly, Shanghai doesn’t show the same pattern of correlation, according to Michael Davidson, head of schools for OECD, because their intervention system is more powerful than the class position of teens, therefore bridging the gap between the poor and the rich when it comes to literacy and, in this case, financial literacy.
According to Time, John W. Rogers, Jr., Chair of the President’s Advisory Council on Financial Capability for Adults, states that financial literacy is extremely important in times of economic crises or of pension reform with more difficult and more complex assignment scheme. In light of this findings, considering that American teens are financial illiterates compared to other countries, educators and policy makers might consider curriculum reform in high schools for the introduction of financial education, in order to prevent economic and social bad consequences.