Many teens have poor basic financial skills, OECD report

A survey of 15-year-olds in 15 countries reveals that many have poor basic financial skills. It finds, for example, that while more than half of teens on average have a bank account, nearly two-thirds cannot understand a bank statement and do not have sufficient skill to manage an account.

“Financial literacy is now globally recognized as an essential life skill,” say the Organisation for Economic Co-operation and Development (OECD) in the executive summary of their recently released report titled “PISA 2015 Results (Volume IV): Students’ Financial Literacy.”

basic financial skills - teen image - pixabay-1899452 The survey found that while most 15-year-olds have bank accounts and earn money, many cannot understand a bank statement or a pay slip. Image: pixabay-1899452

The survey tested 48,000 15-year-olds’ knowledge about money and basic financial skills in the context of real-life situations, such as understanding interest rates on a mobile phone payment plan or loan, the purpose and contents of an invoice, or dealing with bank accounts and debit cards.

Speaking at the launch of the report in Paris recently, OECD Secretary-General Angel Gurría commented that:

“Young people today face more challenging financial choices and more uncertain economic and job prospects given rapid socioeconomic transformation, digitalization and technological change; however, they often lack the education, training and tools to make informed decisions on matters affecting their financial wellbeing.”

“This makes it even more important,” she added, “that we step up our global efforts to help improve the essential life skill of financial literacy.”

The countries participating in the survey were: Australia, Belgium, Brazil, Canada, Chile, China, Italy, Lithuania, the Netherlands, Peru, Poland, Russia, Slovakia, Spain, and the United States.

China had the highest average score, followed by Belgium, Canada, Russia, the Netherlands, and Australia.

Within the four Chinese provinces that took part in the survey – Beijing, Shanghai, Jiangsu and Guangdong – Gurría notes that even “the most socially and economically disadvantaged quarter of students performed as well as the second wealthiest quarter of students in the U.S., and better than the wealthiest quarter of students in Brazil, Chile and Peru.”

Although Australia and the Netherlands performed better than the OECD average, their mean scores have actually slipped since the last survey in 2012. In fact, of the eight countries that took part in both the 2012 and 2015 surveys, only Italy’s and Russia’s teenagers appeared to have improved in basic financial skills.

Gurría says they were particularly concerned to find that at least one in five teens do not have even a very basic level of financial literacy – even in some of the wealthy OECD nations.

She describes as “shocking” the fact that despite nearly 60 percent of the teens surveyed having a bank account and more than 60 percent earning money from formal or informal jobs, “many cannot recognize the value of a simple budget, let alone understand a bank statement or a pay slip.”

The survey found that on average, less-advantaged teenagers tended to have poorer basic financial skills than advantaged teenagers. Teens who were immigrants as opposed to native born also tended to score lower, regardless of how well-off their families were.

The report suggests that schools and colleges could make a difference and help to equip teens with basic financial skills.

Gurría says that “there is an urgent need for all countries, regardless of their economic and financial development, to improve the financial literacy of their students.”

She notes that while a “solid foundation” in mathematics and reading is an essential underpinning for basic financial skills, it is not enough. The survey data highlights many features that are unique to financial literacy, such as understanding the role of income tax, or looking out for fraudulent emails, and being aware that “some deals really are too good to be true.”

You can take the PISA financial literacy test (edition 2012) here.