A new study out from the Organisation for Economic Co-Operation and Development compares rates of financial literacy among young adults (between age 15 and 16) across 64 countries and one mega-city. From the perspective of an American, the results are not very encouraging. Our students were surpassed by most of the other twelve countries in the OECD. Students in the U.S. lagged their contemporaries in Shanghai, in three former Soviet republics, and even in Belgium. The good news is that we did beat the French.
I took a sample test. The questions posed:
a1) Read an invoice. Determine if it is a bill or a record of payment.
a2) Has the company charged for delivery?
b) Examine a graphic showing changes in the price of the shares of a company over a 12-month period.
When was the best time to invest? Did the shares rise 50 percent year-over-year?
c) Review a paycheck. How much was deducted for benefits? What is left for take-home pay?
d) Consider an opportunity to refinance a loan. Is it a positive decision, and if so, why?
No country scored higher than the city-nation of Shanghai, China.
The OECD found that plenty of students are not capable of making even the most basic financial decisions. Almost one of every five American students polled in the survey scored at a level deemed below functionally literate. Those individuals could not gauge differences in unit costs, prepare a simple budget, or interpret a cost into the context of the utility of the good at hand. For example, they could not "choose between buying tomatoes by the kilo or by the box."
With opportunity comes disparity. The countries with more advanced economies are also the ones where the gaps are the greatest between high-achieving and low-achieving students. America's top students match up better with the rest of the OECD than do our worst students. Our upper-tier ranked 8th, but our bottom tier ranked 12th. Our best score as if they lived in Latvia. Our worst might as well be French.
But one of the most important finding, at least in terms of how future policy could address these concerns, is that being good at math and reading probably means that you are also good with money. To me, it suggests that success in teaching financial literacy is just another by-product of teaching children to be literate and numerate. But if the paper's findings are correct, then achieving gains will require that curricula emphasize problem solving. How a person answered the statement "I like to solve complex problems" made a big difference in the extent to which they were capable of navigating their finances. The ones who said "not much/not at all like me" did very poorly. The study could also be read to suggest that embedding a financial literacy curriculum into the standard course of study could have merit.