Digging Deeper: PISA Financial Literacy Results

"09/07/14 - Around one in seven students in the 13 OECD countries and economies that took part in the first OECD PISA international assessment of financial literacy are unable to make even simple decisions about everyday spending, and only one in ten can solve complex financial tasks.

Some 29,000 15 year-olds in 18 countries and economies took part in the test, which assessed the knowledge and skills of teenagers in dealing with financial issues, such as understanding a bank statement, the long-term cost of a loan or knowing how insurance works." - OECD

The United States ranked 8th out of 17 countries [9th out of 18 if you include the province of Shanghai], just behind Latvia. So what does that really mean?

The PISA Financial Literacy Assessment Framework was released some time ago. A matter of fact, we used it as a resource when finalizing the Ohio Department of Education Financial Literacy Standards. Standards in Ohio exist and are required to be implemented, as they are in 34 additional states. However, Ohio's financial education policy reflects a complex challenge in the United States... standards may exist and are required to be taught, but per Jump$tart, at least 45 states do not mandate a personal finance class to graduate high school. Further, I have yet to find any states who require and pay for teachers to receive financial education content certification.

The PISA financial literacy assessment was administered to a nationally representative sample of students in schools across the United States. Financial education efforts mandated in the United States are broad ranging, if they exist at all. Take for example the financial literacy requirements in Connecticut, Massachusetts, and Florida per the Council for Economic Education Survey of the States.

• Connecticut - Personal finance standards are not required to be taught; Personal finance is not required to be offered; Personal finance is not required to be taken to graduate; Personal finance testing not required
• Massachusetts - Personal finance standards are not required to be taught; Personal finance is not required to be offered; Personal finance is not required to be taken to graduate; Personal finance testing not required
• Florida - Personal finance are standards required to be taught; Personal finance is not required to be offered; Personal finance is not required to be taken to graduate; Personal finance testing not required

The preparation the students received from these three states fell well short of the CFPB financial education recommendations. 

At the time of testing, Florida, like Ohio, required personal finance standards be taught. However, if standards are not taught by a trained teacher, are not taught as a semester course, and are not tested while other subjects are tested... the commitment schools make to teaching the coursework varies and is usually minimal. 

Sadly, students who needed a helping hand the most appear to be our most underserved. As with other PISA assessed subjects, socioeconomics seemed to be one of the key contributing factors. Further, the questions used in the financial literacy assessment are practical and financially consequential. Problems were presented in real life context. PISA assessed students’ ability to apply their knowledge and skills to real-life situations involving financial issues and decisions. For example, students were asked to respond to questions about billing invoices and debt products.

Try sample questions yourself.

At a time when high stakes standardizing testing is at the forefront of education policymaking, we have to ask ourselves what could be more high stakes for our students than making bad choices that could lead to losing thousands of dollars.

Much is to be considered... How can we adopt legislation that ensures every student receives sufficient financial education instruction? How do we better train our teachers and provide evidence based results? How do we bring parents into the circle? How do we fully utilize synergies between the public and private sectors? How do we look at our standards through the eyes of a behavioral economist and build strong bridges between what students are learning, and how students are behaving? How can we better focus on concepts that yield evidence based results? How can we bring to scale successful in-school banking programs?

One thing is certain, the implementation of financial literacy in our schools is in its infancy stages and there are a lot of passionate educators and leaders who want to do more. 

Clearly the expert to follow to learn much more is Annamaria Lusardi (Twitter: @A_Lusardi).