Students' Financial Literacy: Results from PISA 2015

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Students’ financial literacy: results from PISA 2015 Wednesday 24 May 2017 OECD, Paris

Transcript of Students' Financial Literacy: Results from PISA 2015

Page 1: Students' Financial Literacy: Results from PISA 2015

Students’ financial literacy:

results from PISA 2015

Wednesday 24 May 2017

OECD, Paris

Page 2: Students' Financial Literacy: Results from PISA 2015

PISA 2015 Financial Literacy: Results in Brief

Page 3: Students' Financial Literacy: Results from PISA 2015

• On average across OECD countries and

economies, 22% of students do not

have basic financial skills

• Only about 12% of students across

participating OECD countries and

economies are top performers, as they

can tackle the most difficult tasks

Too many students lack basic financial skills

22%

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Some 56% of 15-year-olds in participating OECD countries and economies have a bank account,

19% have a prepaid debit card

Young people are already financial consumers and will soon

encounter complex financial decision, like student loans

Some 64% earn money from some type of work

activity

56%

64%But fewer than one in three students have the

skills to manage a bank account 31%

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• On average across participating OECD countries and

economies, 84% discuss money matters with their

parents at least once a month

• Students who do so tend to perform better in financial

literacy

Students acquire financial skills from their parents…

But up to what their parents can transmit them

• But financial skills are strongly related to the

socio-economic background of their family

• Advantaged students score 89 points higher in

financial literacy than disadvantaged students

84%

89 score

points

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• PISA data reveal that 38% of the variation

in financial literacy is not explained by

mathematics and reading skills

• Many features of financial literacy are

unique to the subject

• The symposium this afternoon will

discuss several school programmes

Schools are well positioned to teach students what they may

not be able to learn from their parents or by themselves

38%

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PISA 2015 Financial Literacy: Framework, Rationale

and Results in Detail

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PISA in brief – 2015

In 2015, over half a million students…- representing 28 million 15-year-olds in 72 countries/economies

… took an internationally agreed 2-hour test in science, mathematics,

reading, collaborative problem-solving and financial literacy …- Goes beyond testing whether students can reproduce what they were taught…

… to assess students’ capacity to extrapolate from what they know and creatively apply

their knowledge in novel situations

- Total of 390 minutes of assessment material

… and responded to questions on…- their personal background, their schools, their well-being and their motivation

Parents, principals, teachers and system leaders provided data on:- school policies, practices, resources and institutional factors that help explain

performance differences

- 89,000 parents, 93,000 teachers and 17,500 principals responded

Page 9: Students' Financial Literacy: Results from PISA 2015

“knowledge and understanding of

financial concepts and risks, and the

skills, motivation and confidence to apply

such knowledge and understanding in

order to make effective decisions across

a range of financial contexts, to improve

the financial well-being of individuals and

society, and to enable participation in

economic life”

Financial literacy in PISA

Page 10: Students' Financial Literacy: Results from PISA 2015

What does financial literacy mean

for the lives of 15-year-olds?

• …if they go to the cinema, will they still have enough money for the bus fare home? Or would it be better to buy pizza and invite friends home?

Balance their priority and plan what to spend money on

• …a games console will need new games, a motorbike will need fuel, tyres and services

Remember that some of the purchases have ongoing costs

• …Some emails that look like they came from their bank might not be legitimate, they should know what to do if they are not sure

Being alert to possible fraud

• …If their phone gets stolen, they should ask their parents if it is covered by their household insurance

Knowing what risk is and what insurance is meant for

• …they should know that if they buy a computer on credit they will have to pay interest on the loan, on top of the advertised price for the compute

Make an informed decision about credit

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Financial literacy content, context and processes

Content

Money and transactions

Planning and managing finances

Risk and reward

Financial landscape

Processes

Identifying financial information

Analyse information in a financial context

Evaluate financial issues

Apply financial knowledge and understanding

Contexts

Education and work

Home and family

Individual

Societal

Page 12: Students' Financial Literacy: Results from PISA 2015

Financial literacy content

Content

Money and transactions

Planning and managing finances

Risk and reward

Financial landscape

• Coins and notes• Different ways of making payments• Understanding bank statements

• Saving and spending• Credit and debt• Financial decision making

• Investment and saving• Diversification• Using credit• Volatility of the market• Exchange rates

• Consumer rights and responsibilities• Understanding of the wider financial, econom

ic and social system

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The PISA financial literacy test

• In 2015, around 48 000 students were assessed in financial literacy, representing about 12 million 15-year-olds in the schools of the 15 participating countries and economies

• Students in countries and economies that participated in the financial literacy answered– a two-hour combination of tasks in science, reading and mathematics

– A one-hour test in financial literacy (43 items) after the core assessment

– Questions about their experience with money such as discussing money matters with parents, basic financial products and sources of money (through a ‘money management questionnaire’)

– … in addition to the standard questions about their personal background

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Page 15: Students' Financial Literacy: Results from PISA 2015

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Sara receives this invoice in the mail

Sample Question: INVOICE

Content: Money and transactions, it involves awareness of the different forms and purposes of money and handling simple monetary

transactions such as everyday payments

The main task is to know the purpose and demonstrate a basic understanding of an invoice

This is an easy item – Level 1 on the financial literacy scale (below baseline)

Question 1: Why was this invoice sent to Sarah?A. Because Sarah needs to pay the money to Breezy Clothing.B. Because Breezy Clothing needs to pay the money to Sarah.C. Because Sarah has paid the money to Breezy Clothing.D. Because Breezy Clothing has paid the money to Sarah.

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Each month, Jane’s salary is paid into her bank account. This is Jane’s pay slip for July

Sample Question: PAY SLIP

Content: Money and transactions and the context is education and work

Question 1: How much money did Jane’s employer pay into her bank account on 31 July?A. 300 zedsB. 2500 zedsC. 2800 zedsD. 19600 zeds

The main task is read the pay slip and to recognise that Jane’s employer will only pay net salary into her bank

Process: Identify financial information

This is a relatively hard item – Level 4 on the financial literacy scale

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Sara receives this invoice in the mail

Sample Question: INVOICE

This is a hard item – Level 5 on the financial literacy scale

Content: Money and transactions

This item focuses on students’ ability to apply financial knowledge and understanding

Question 3:Sara notices that Breezy Clothing made a mistake in theinvoice. Sara ordered and received two T-shirts, not three. The postage fee isa fixed charged.

What will be the total of the new invoice?

131 Zeds

Page 18: Students' Financial Literacy: Results from PISA 2015

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David banks with ZedBank. He receives this e-mail message

Sample Question: BANK ERROR

Question 1: Which of these statements would be good advice for David?

Dear ZedBank member,

There has been an error on the ZedBank server and your Internet login details

have been lost.

As a result, you have no access to Internet banking.

Most importantly your account is no longer secure.

Please click on the link below and follow the instructions to restore access. You

will be asked to provide your Internet banking details.

https://ZedBank.com/

Reply to the e-mail message and provide his Internet banking details Yes / NoContact his bank to inquire about the e-mail message Yes / NoIf the link is the same as his bank’s website address, click on the link and follow the instructions

Yes / No

This is a hard item – Level 5Content: financial landscape, because Internet banking is

part of what students are likely to experience now or in the

near future. This item focuses on students’ ability to evaluate financial issues

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Students increasingly needfinancial skills

Many young people face financial decisions and are consumers of financial services. They are likely to face

growing complexity and risks in the financial marketplace as they move into adulthood.

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Students holding a bank account

Students holding a bank account who perform below proficiency Level 4

More than 70% of students hold a bank account in Australia,

Belgium (Flemish), the Canadian provinces and the Netherlands

Table IV.5.13b

At Level 4, students can

apply their understanding of

less common financial

concepts and terms to

contexts that will be

relevant to them as they

move towards adulthood,

such as bank account

management […]. They can

interpret and evaluate a

range of detailed financial

documents, such as bank

statements […]

Students who have a bank

account but do not reach

proficiency Level 4

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0102030405060708090

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Working outside school hours (e.g. a holiday job, part-time work)

Working in a family business

Occasional informal jobs (e.g. baby-sitting or gardening)

Any work activity (working outside school hours and/or working in a family business and/or occasional informal jobs)

Some 64% of students earn money from some formal

or informal work activity on average across OECD

Table IV.5.15

Percentage of students who receive money from:

Page 22: Students' Financial Literacy: Results from PISA 2015

• Percentage of students in Australia at bachelor’s, master’s or doctoral levels who had a public student loan in 2013/14

79%

• Percentage of bachelor’s-degree students in the United States who had a public student loan in 2013/14

62%

• Average amount of debt students graduate with in the Netherlands

USD 18 000

• Average amount of debt students graduate with in Canada

USD 12 000

In some countries, students nearing the end of compulsory education will soon

decide whether to take a student loan

Source: Education at a Glance 20160 10 20 30 40 50

Australia

United States

Netherlands

ParticipatingCanadianprovinces

%

Percentage of 15-year-old students

who perform at Level 4 and above

At Level 4, students […] can

make financial decisions

taking into account longer-

term consequences, such as

understanding the overall

cost implication of paying

back a loan over a longer

period […].

Page 23: Students' Financial Literacy: Results from PISA 2015

0 10 20 30 40 50 60 70 80 90

Peru

Brazil

Chile

Lithuania

Russian Federation

Slovak Republic

China

Italy

Belgium

Poland

Spain

Canada

Netherlands

Australia

United States

Made payments online using the Internet Made a transaction using a mobile phone

Many young people use digital financial products

Source: World Bank Global Findex, 2014

Percentage of young people age 15-24 who have:

%

Page 24: Students' Financial Literacy: Results from PISA 2015

What the results tell us?

Page 25: Students' Financial Literacy: Results from PISA 2015

1. What are the current needs and gaps in financial literacy of students across countries and within countries?

2. What are the main factors explaining the wide inequalities within country?

3. Is financial literacy only about mathematics and reading ?

4. What are students’ current experiences with money matters ? Is it related to financial literacy?

5. How is financial literacy related to students’ financial behaviorsand future expectations?

→ Goal : Evidence to support effective policy action

5 research questions and a policy goal

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Students’ performance in financial literacy

What are the needs and gaps across and within countries?

Page 27: Students' Financial Literacy: Results from PISA 2015

Mean performance in

financial literacy B-S-J-G (China)

Belgium (Flemish)Canadian provinces

RussiaNetherlands

Australia

United StatesPolandItaly

Spain

LithuaniaSlovak Republic

Chile

Peru

Brazil

380

400

420

440

460

480

500

520

540

560

580

Mean score Figure IV.3.2

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Figure IV.3.6

13 22 22 13

19 20 20 20 22 2225

32 3538

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10 12 64

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Students’ financial literacy by proficiency levels

%

Below Level 2, students can identify common

financial products and terms and interpret

information relating to basic financial concepts.

They can recognise the difference between

needs and wants and can make simple

decisions on everyday spending. They can

recognise the purpose of everyday financial

documents such as an invoice and apply single

and basic numerical operations (addition,

subtraction or multiplication) in financial

contexts that they are likely to have experienced

personally.

At Level 2, students begin to apply their

knowledge of common financial products and

commonly used financial terms and concepts.

They can use given information to make

financial decisions in contexts that are

immediately relevant to them. They can

recognise the value of a simple budget and can

interpret prominent features of everyday

financial documents. They can apply single

basic numerical operations, including division,

to answer financial questions. They show an

understanding of the relationships between

different financial elements, such as the

amount of use and the costs incurred.

At Level 3, students can apply their

understanding of commonly used financial

concepts, terms and products to situations

that are relevant to them. They begin to

consider the consequences of financial

decisions and they can make simple financial

plans in familiar contexts. They can make

straightforward interpretations of a range of

financial documents and can apply a range of

basic numerical operations, including

calculating percentages. They can choose

the numerical operations needed to solve

routine problems in relatively common

financial literacy contexts, such as budget

calculations.

At Level 4, students can apply their

understanding of less common financial

concepts and terms to contexts that will be

relevant to them as they move towards

adulthood, such as bank account

management and compound interest in

saving products. They can interpret and

evaluate a range of detailed financial

documents, such as bank statements, and

explain the functions of less commonly

used financial products. They can make

financial decisions taking into account

longer-term consequences, such as

understanding the overall cost implication

of paying back a loan over a longer period,

and they can solve routine problems in less

common financial contexts.

At Level 5, students can apply their

understanding of a wide range of

financial terms and concepts to contexts

that may only become relevant to their

lives in the long term. They can analyse

complex financial products and can take

into account features of financial

documents that are significant but

unstated or not immediately evident,

such as transaction costs. They can

work with a high level of accuracy and

solve non-routine financial problems,

and they can describe the potential

outcomes of financial decisions,

showing an understanding of the wider

financial landscape, such as income tax.

Page 29: Students' Financial Literacy: Results from PISA 2015

Figure IV.3.6

13 22 22 13

19 20 20 20 22 2225

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Students’ financial literacy by proficiency levels

%

BANK ERROR - Evaluate a potential financial

fraud and respond appropriately to a financial

scam e-mail message – Level 5

INVOICE Question 2 - Identify a delivery cost that

is explicitly stated on an invoice – Level 2

INVOICE Question 1 – Recognise the purpose of

an invoice - Below Level 2

PAY SLIP - Read a pay slip and recognise that

the employer will only pay net salary into the

employee’s bank – Level 4

INVOICE Question 3 (partial credit) - Interpret

various elements on the same invoice to correct a

mistake in the billing – Level 3

Page 30: Students' Financial Literacy: Results from PISA 2015

Variation within each country is wider than the variation between

countries at the mean

Figure IV.4.1

Percentage of students at various percentiles on the financial literacy scale

200 300 400 500 600 700

B-S-J-G (China) 312Belgium (Flemish) 291

Canadian provinces 295Russia 232

Netherlands 312Australia 309

OECD average-10 285United States 280

Poland 262Italy 249

Spain 265Lithuania 266

Slovak Republic 311Chile 274Peru 276

Brazil 302

25th - 10th percentile 50th - 25th percentile 75th - 50th percentile 90th - 75th percentile

Score-point

difference between

90th and 10th

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Varying opportunities to improve students’ financial literacy

What are the main factors (gender, socio-economic and immigrant background) explaining the wide inequalities within country?

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Before accounting for performance in other subjects

After accounting for performance in mathematics and reading

In most countries/economies there are no differences in

financial literacy between boys and girls at the mean…

Figure IV.4.4 S

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Girls perform better

Boys perform better

Gender differences in

financial literacy may be

related different

opportunities for learning,

different contexts in

which men and women

grow up and live, and to

a possible variation of

these factors across

generations.

Difference between boys and girls

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… but in 9 countries and economies out of 15, more boys than girls

are low performers

Figure IV.4.5

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Top quarter of ESCS

Third quarter of ESCS

Second quarter of ESCS

Bottom quarter of ESCS

Difference

between

students in the

top quarter and

students in the

bottom quarter

of this index

Socio-economically advantaged students score 89 points higher

than disadvantaged students, on average across OECD,

equivalent to more than one PISA proficiency level

Table IV.4.11

Mean score, by quarters of the PISA index of economic, social and cultural status (ESCS)

Page 35: Students' Financial Literacy: Results from PISA 2015

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Never or hardly ever Once or twice a month Once or twice a week Almost every day

Sco

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Parents play a role in developing their children’s financial literacy not

only through the resources that they make available to them but also

through direct engagement

Figure IV.5.1

Mean score, by students’ answers to the question:

“How often do you discuss money matters (e.g. talk about spending, saving, banking, investment) with your parents?”

Discussing money matters with parents at least sometimes is associated with higher financial literacy than never discussing the subject, after accounting for students’ socio-economic status

But discussing very

often may mean something else….

Page 36: Students' Financial Literacy: Results from PISA 2015

Immigrant students score 26 points lower in financial literacy than

native-born students of similar socio-economic status

Figure IV.4.10

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Percentage of

students with an

immigrant

background

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Is financial literacy only about mathematics and reading?

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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Russia 45

Brazil 47

Slovak Republic 48

Italy 52

Canadian provinces 53

Lithuania 58

Spain 58

OECD average-10 62

Poland 62

Chile 62

Peru 68

B-S-J-G (China) 69

United States 70

Belgium (Flemish) 70

Netherlands 71

Australia 71

Variation uniquely associated with mathematics performanceVariation uniquely associated with reading performanceVariation associated with more than one domainVariation uniquely captured by the financial literacy assessment

Total explained

variation

Student performance in financial literacy is correlated with performance

in mathematics and reading, but around 38% of the score reflects factors

that are uniquely captured by the financial literacy assessment

Table IV.3.10a

Page 39: Students' Financial Literacy: Results from PISA 2015

Financial literacy skills may go beyond or

fall short of the ability to use the knowledge that students acquired

in compulsory education

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Students’ performance in

financial literacy is lower

than the performance of

students with similar scores

in mathematics and reading

Students’ performance in

financial literacy is higher

than the performance of

students with similar scores

in mathematics and reading

Figure IV.3.12

Difference between the actual financial literacy score and the score predicted by students’

performance in mathematics and reading

Highest performing countries/economies

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Learning by doing

What are students’ current experiences with money matters ?

Are these related to financial literacy?

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Student has both a bank account and a prepaid debit card Student has a bank account but no prepaid debit card

Student has a prepaid debit card but no bank account Student earns money from a work activity

Many students hold basic financial

products or earn money from work

Figure IV.2.1

Page 42: Students' Financial Literacy: Results from PISA 2015

On average, students who hold a bank account perform better in

financial literacy than students of similar socio-economic status

who do not have a bank account

Figure IV.5.5

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s

OE

CD

avera

ge-1

0

Ita

ly

Belg

ium

(F

lem

ish

)

Austr

alia

Spain

Ca

nad

ian

pro

vin

ce

s

Ne

therl

and

s

Sco

re-p

oin

t d

iffe

ren

ce

After accounting for socio-economic status Before accounting for socio-economic status

Difference between students who have a bank account and students who do not

Page 43: Students' Financial Literacy: Results from PISA 2015

0

1

2

3

4

5

6

7

Ru

ssia

Ita

ly

Slo

vak R

epub

lic

Ca

nad

ian

pro

vin

ce

s

Ch

ile

Spain

Austr

alia

Belg

ium

(F

lem

ish

)

OE

CD

avera

ge-1

0

Lithu

ania

Pola

nd

Ne

therl

and

s

B-S

-J-G

(C

hin

a)

Un

ite

d S

tate

s

Od

ds r

atio

s

Increased likelihood of socio-economically advantaged students to hold a bank account

Advantaged students are more likely to have a bank account

Table IV.5.10

More than twice as likely to have a bank account

Six times more likely to have a bank account

Page 44: Students' Financial Literacy: Results from PISA 2015

Financial literacy and financial decisions and life aspirations

How is financial literacy related to students’ financial behaviors and future expectations?

Page 45: Students' Financial Literacy: Results from PISA 2015

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Slo

vak R

epub

lic

Belg

ium

(F

lem

ish

)

Ita

ly

Pola

nd

Lithu

ania

OE

CD

avera

ge-1

0

Ca

nad

ian

pro

vin

ces

Ne

therl

and

s

Spain

Austr

alia

B-S

-J-G

(C

hin

a)

Un

ite

d S

tate

s

Ru

ssia

Ch

ile

Not buy it

Save up to buy it

Try to borrow money from a friend

Try to borrow money from a familymember

Buy it with money that really shouldbe used for something else

Most students would save if they want to buy something for which

they do not have enough money

Figure IV.6.1

Percentage of students who gave the following replies to the question:

“Likelihood of students' response to the question “If you don’t have enough money to buy something you really want

(e.g. an item of clothing, sports equipment) what are you most likely to do?”

Page 46: Students' Financial Literacy: Results from PISA 2015

1.00

1.50

2.00

2.50

3.00

3.50

Try to borrow moneyfrom a family

member

Try to borrow moneyfrom a friend

Save up to buy it Not buy it

Odds r

atio

Level 2 or 3 Level 4 or 5

Students' financial literacy is associated with

understanding the value of saving

Figure IV.6.2

High performing students are

more than twice as likely as low-

performing students in financial

literacy to choose the statement

"Save up to buy it" rather than

"Buy it with money that really

should be used for something

else“, after accounting for

performance in mathematics

and reading and other

characteristics.

Page 47: Students' Financial Literacy: Results from PISA 2015

Top-performing students in financial literacy are more likely than low-

performing students to report that they expect to complete university

education – in some countries

0

0.5

1

1.5

2

2.5

3

3.5

4

Ca

nad

ian

pro

vin

ce

s

Belg

ium

(F

lem

ish

)

Pola

nd

Bra

zil

Un

ite

d S

tate

s

Ru

ssia

B-S

-J-G

(C

hin

a)

Ne

therl

and

s

OE

CD

avera

ge-1

0

Ch

ile

Lithu

ania

Ita

ly

Spain

Peru

Austr

alia

Odds r

atio

Level 2

Level 3

Level 4

Level 5

Figure IV.6.5

Increased likelihood of students at various proficiency levels in financial literacy to expect to complete education at ISCED

Level 5A or 6, after accounting for students performance in mathematics and reading and other characteristics

These students

may be more likely

to see the value of

investing in higher

education

Page 48: Students' Financial Literacy: Results from PISA 2015

Top-performing students in financial literacy are more likely than low-

performing students with similar characteristics to report that they

expect to have a high-skilled occupation when they are 30 years old

0.8

1

1.2

1.4

1.6

1.8

2

B-S

-J-G

(C

hin

a)

Peru

Ca

nad

ian

pro

vin

ce

s

Pola

nd

Bra

zil

Spain

Slo

vak R

epub

lic

Un

ite

d S

tate

s

Ch

ile

OE

CD

avera

ge-1

0

Lithu

ania

Ita

ly

Ru

ssia

Austr

alia

Ne

therl

and

s

Odds r

atio

Level 2

Level 3

Level 4

Level 5

Figure IV.6.6

These students may

be more likely to see

the value of investing

in higher education to

work in a high-skilled

occupation

Page 49: Students' Financial Literacy: Results from PISA 2015

What do the results mean for policy?

Page 50: Students' Financial Literacy: Results from PISA 2015

Financial literacy

skills for all

students

Address the needs of low-performing

students Tackle socio-

economic inequalities

early on

Provide equal opportunities for learning to boys

and girls

Help students make the most of

available learning opportunities at

school

Target parents at the same time as

young people

Provide young people with safe opportunities to

learn by experience outside of school

Evaluate the impact of

initiatives in and outside of

school

A multifaceted policy agenda

Page 51: Students' Financial Literacy: Results from PISA 2015

What are countries already doing?

An increasing number of countries is developing targeted initiatives in and out of school

Page 52: Students' Financial Literacy: Results from PISA 2015

• 10 out of the 15 participating countries and economies

are implementing a national strategy for financial

education specifically addressing young people among

their target audiences:

… Australia, Brazil, Canada, Italy, the Netherlands, the

Russian Federation, Spain, Peru and the United States

.. And over 65 countries these days

National strategies for financial education

Page 53: Students' Financial Literacy: Results from PISA 2015

• Several countries started introducing some financial literacy elements in the school curriculum into existing subjects (Australia, Brazil, Flemish Community of Belgium, Lithuania, Peru, Slovak Republic, Spain – Canada and the United states, depending on province/state)

… but to what extent is the curriculum implemented?

• Some examples of evaluation of financial education programmes in school (Brazil, Italy, Russia, Spain, US)

…is it effective? evaluation needs to become systematic

Initiatives in school

Page 54: Students' Financial Literacy: Results from PISA 2015

• Videos, competitions, interactive tools, events

(money weeks, savings day), museums, serious

games

…complementary to school initiatives

…can reach out-of-school young people

… participation of non-profits and private sector to be monitored

…again their impact needs to be evaluated more regularly

Out of school initiatives

Page 55: Students' Financial Literacy: Results from PISA 2015

• Continue to collect and share evidence on policy

effectiveness through the OECD/International

Network on Financial Education (INFE)

• PISA 2018 financial literacy: 21 countriesAustralia, Brazil, Bulgaria, Canada, Chile, Estonia, Finland, Georgia,

Indonesia, Italy, Latvia, Lithuania, Netherlands, Peru, Poland, Portugal,

Russian Federation, Serbia, Slovak Republic, Spain, United States

• Possibility of a further assessment in 2021

Next steps

Page 56: Students' Financial Literacy: Results from PISA 2015

www.oecd.org/finance/financial-education

[email protected]

Thank you

Find out more about our work at www.oecd.org/pisa

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