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This presentation by Flore-Anne Messy was made at the first session of the 2nd OECD-GFLEC Global Research Symposium to Advance Financial Literacy on 6 November 2014, which addressed cutting-edge policy issues and research ideas to advance the global financial literacy agenda. Find out more at http://www.oecd.org/daf/fin/financial-education/oecd-infe-gflecsymposiumfinancialliteracy.htm
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OECD EMPLOYER
BRAND
Playbook
1
PISA 2012
Students and Money
Financial literacy skills for the
21st Century
HIGHLIGHTS of
FINDINGS
What is PISA? What is Financial Literacy?
CONTEXT AND DEFINITION
PISA in brief
• Over half a million students… – representing 28 million 15-year-olds in 65 countries/economies
… took an internationally agreed 2-hour test… – 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
– Mathematics, reading, science, problem solving, financial literacy
… and responded to questions on… – their personal background, their schools
and their engagement with learning and school
• Parents, principals and system leaders provided data on… – school policies, practices, resources and institutional factors that
help explain performance differences .
Financial literacy: 29 000 students in 18 countries/economies took a two hour paper test on financial literacy,
mathematics and reading
3
PISA Financial literacy -definition
PISA has developed the first international framework for financial literacy. It defines financial literacy for youth as:
“Knowledge and understanding of financial concepts
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”.
4
5 Examples of what this might mean for 15 year olds
• …if they go to the cinema, will they still have enough money for the bus fare home?
Balance their priority and plan
what to spend money on
• … a motorbike will need fuel and tyres and services and an insurance coverage.
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
5
Why does financial literacy matter to 15-year-olds?
RELEVANCE
Big decisions start early:
such as continuing
education vs working
Shrinking welfare
systems; increased
personal responsibility
Shifting
demographics-
increased
longevity
Changing labour-markets
and reduced job security
Access to
financial products
at young ages
Increasingly
complex financial
markets
Relevance of financial literacy for 15-year-olds 7
0 20 40 60 80
Shanghai-ChinaCroatia
SpainItaly
LatviaOECD average-13
EstoniaFrance
Slovak RepublicIsrael
Russian FederationSlovenia
United StatesCzech Republic
Flemish Community (Belgium)Australia
New Zealand
Most students receive money from some type of work
(PISA data)
…such as a holiday job, part-time work, or from working in a family business, or from occasional informal jobs (e.g. baby-sitting or gardening) (%)
Students earning money outside of school hours
8
0 20 40 60 80 100
PolandSlovak Republic
IsraelItaly
CroatiaCzech Republic
LatviaUnited States
Shanghai-ChinaOECD average-13
SpainFlemish Community (Belgium)
FranceAustraliaEstonia
New ZealandSlovenia
Percentage of students with a bank account
Many students have a bank account (PISA data) 9
0
10
20
30
40
50
60
70
80
Chin
a
Russ
ian F
edera
tion
Cze
ch R
epublic
Est
onia
Slo
vak R
epublic
Pola
nd
OECD
ave
rage
Germ
any
Aust
ralia
United S
tate
s
Belg
ium
New
Zeala
nd
Isre
al
Italy
Spain
France
2010 or latest available year
1970 or first available year
Their decisions today may impact on their future : Do they recognise the importance of saving for the long-term?
Source: OECD Factbook 2013: Economic, Environmental and Social Statistics - © OECD 2012
Life expectancy is high, and growing. Young people today will need to be
able to support themselves for many years
10
What is in the PISA financial literacy assessment?
THE FRAMEWORK AND ITEMS
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
PISA financial literacy multidimensional
assessment framework 12
http://www.oecd.org/pisa/test/
Take 5 questions from the test yourself 13
14
Sara receives this invoice in the mail
Sample Question: INVOICE
This is an easy item – Level 1 on the financial literacy scale (below baseline) Difficulty: 360 The task is to recognise the purpose of an invoice Content: Money and transactions Process: Identify financial information
INVOICE 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.
14
15
NEW OFFER
Mrs Jones has a loan of 8000 zeds with FirstZed Finance. The annual interest rate on the loan is 15%. Her repayments each month are 150 zeds.
After one year Mrs Jones still owes 7400 zeds.
Another finance company called Zedbest will give Mrs Jones a lona for 10 000 zeds with an annual interest rate of 13%. Her repayments each month would also be 150 zeds
NEW OFFER- Question 1
If she takes the Zedbest loan, Mrs Jones will immediately pay off her existing loan.
What are two other financial benefits for Mrs Jones if she takes the Zedbest loan?
1. …………………………………………………………………………………………………
2. …………………………………………………………………………………………………
Sample Question: NEW OFFER
Question type: Constructed response Description: Recognise positive consequences of transferring a loan to a lower interest rate Content: Planning and managing finances Process: Analyse information in a financial context Difficulty: Full credit: 663 (Level 5); Partial credit: 510 (Level 3)
15
Describing performance levels
Level 5
Level 4
Level 3
Level 2
Level 1 or below
Financial literacy Performance levels
Top performers
Baseline
• Apply understanding of a wide range of financial terms and concepts to contexts that may only become relevant to their lives in the long term. • Analyse complex financial products and take into account features of financial • documents that are significant but unstated or not immediately evident. • Work with a high level of accuracy and solve non-routine financial problems • Describe the potential outcomes of financial decisions, showing an understand
ing of the wider financial landscape, such as income tax.
• Apply understanding of less common financial concepts and terms to contexts that will be relevant to them as they move towards adulthood (e.g.
bank account management and compound interest in saving products). • Interpret/ evaluate a range of detailed financial documents • Explain the functions of less commonly used financial products. • Make financial decisions taking into account longer-term consequences
• Apply understanding of commonly used financial concepts, terms and products to situations that are relevant to them.
• Begin to consider the consequences of financial decisions • Make simple financial plans in familiar contexts. • Interpretate a range of financial documents
• Begin to apply knowledge of common financial products, terms and concepts. • Recognise the value of a simple budget. • Make financial decisions in contexts that are immediately relevant • They show an understanding of relationships such as the amount something is
used and the costs incurred (such as running a car). • Identify common financial products and terms • Interpret information relating to basic financial concepts. • Recognise the difference between needs and wants; make simple decisions • Recognise the purpose of everyday financial documents such as an invoice
16
How well prepared are young people to make complex financial decisions?
THE RESULTS
Strong performance in
financial literacy
Low performance in financial literacy
Average performance
of 15-year-olds in
financial literacy
18
Shanghai-China
Flemish Community (Belgium)
Estonia Australia New Zealand
Czech Republic Poland
Latvia
United States France
Russian Federation Slovenia Spain
Croatia Israel
Slovak Republic Italy
Colombia 375
385
395
405
415
425
435
445
455
465
475
485
495
505
515
525
535
545
555
565
575
585
595
605
Mean score
15%
23%
30%
22%
10%
OECD average-13
Distribution of student performance
625 and above
550 to <625
475 to <550
400 to <475
Less than 400 points
Financial literacy performance levels
Top performers
Baseline
19
Wide skill gaps within countries…
190
290
390
490
590
690
Colo
mbia
Slo
vak
Republic
Isra
el
Italy
France
United S
tate
s
Slo
venia
Cro
atia
Spain
Russ
ian F
edera
tion
OECD
ave
rage-1
3
New
Zeala
nd
Latv
ia
Pola
nd
Cze
ch R
epublic
Aust
ralia
Est
onia
Flem
ish C
om
munity
(Belg
ium
)
Shanghai-Chin
a
Difference 75th and 25th 5th 95th
20
United States
Poland New Zealand
Estonia
Croatia
Latvia
Slovak Republic
Czech Republic
France
Australia
Israel Spain
Slovenia
Colombia
Russian Federation
Italy
R² = 0.1632
370
390
410
430
450
470
490
510
530
550
9 000 14 000 19 000 24 000 29 000 34 000 39 000 44 000 49 000
Sco
re p
oin
ts
Per capita GDP (USD converted using PPPs), 2010 or the latest year
GDP per capita explains only 16% of the country level variation in financial literacy
Differences only partially explained
by GDP per capita 21
How equitably are learning opportunities distributed?
GROUPS TO BE TARGETED
Are there gender differences in financial literacy?
Italy
350
400
450
500
550
600
650
350 400 450 500 550 600 650
Girls' m
ean s
core
Boys' mean score
Boys perform better than girls
Girls perform better than boys
17
22
28
22
11
14
24
32
22
8
0 10 20 30 40
Level 1
and below
Level 2
Level 3
Level 4
Level 5
Girls
Boys
OECD analysis on adults finds that men outperform women. PISA indicates that among 15 year-olds, on average there are no gender differences (except in Italy) but there are fewer girls at the top and the bottom
Policies should aim to enhance girls abilities and support underperforming boys
23
0
2
4
6
8
10
12
14
16
18
20
Esto
nia
Italy
Ru
ssia
n F
ede
ratio
n
Cro
atia
Austr
alia
Fle
mis
h C
om
mu
nity
(Be
lgiu
m)
Pola
nd
Sha
ngh
ai-
Ch
ina
Co
lom
bia
Latv
ia
Czech R
ep
ub
lic
OE
CD
ave
rag
e-1
3
Isra
el
Spa
in
Fra
nce
Slo
ven
ia
United
Sta
tes
Slo
vak R
epu
blic
New
Ze
ala
nd
Financial literacy Mathematics Reading
Pe
rce
nta
ge
of va
riatio
n in
pe
rfo
rma
nce
exp
lain
ed
by s
ocio
-econ
om
ic s
tatu
s
Socio-economic status matters
and in some countries more than for mathematics or reading 24
-40
-20
0
20
40
60
80
100Fr
ance
1
3
Flem
ish C
om
munity
(Belg
ium
) 10
Slo
venia
8
Spain
1
1
Est
onia
1
0
Cze
ch R
epublic
2
OECD
ave
rage-1
3 1
1
Italy
7
Russ
ian F
edera
tion 1
0
New
Zeala
nd
27
United S
tate
s 22
Cro
atia 1
2
Isra
el
17
Latv
ia
3
Aust
ralia
2
0
Statistically significant Not statistically significant
Percentage of immigrant students
Difference between the scores of non-immigrant
students and immigrant students (not accounting
for other factors)
Students without an immigrant background perform
better than those who are 1st or 2nd generation migrants 25
400
450
500
550
600
650
Shanghai-Chin
a
Flem
ish C
om
munity…
Est
onia
New
Zeala
nd
Aust
ralia
Pola
nd
Cze
ch R
epublic
Latv
ia
OECD
ave
rage-1
3
Cro
atia
Spain
Russ
ian F
edera
tion
United S
tate
s
Slo
venia
Slo
vak R
epublic
Isra
el
Italy
Colo
mbia
Students attending schools located in a village, hamlet or rural area (fewer than 3 000 people)
Students attending schools located in a city (100 000 or more
Students attending school in rural locations do less
well than those in urban locations
Mean scores of students in schools in different locations
26
How do students develop financial literacy skills ?
IMPORTANCE OF READING AND MATHEMATICS AS
FOUNDATION SKILLS
RELEVANCE OF EXPERIENCE AND ATTITUDES TO DEVELOP THE SKILLS
Isra
el
Colo
mb
ia
Sh
an
gh
ai-C
hin
a
La
tvia
Unite
d S
tate
s
OE
CD
ave
rage
-13
Cro
atia
Po
lan
d
Slo
va
k R
ep
ub
lic
Sp
ain
Esto
nia
Fle
mis
h C
om
mu
nity (
Be
lgiu
m)
New
Zea
lan
d
Russia
n F
ed
era
tio
n
Au
str
alia
Cze
ch
Re
pu
blic
Fra
nce
Ita
ly
Slo
ve
nia
-30
-20
-10
0
10
20
30%
Mathematics and reading are foundations
of financial literacy but the situation is uneven across countries
Students' performance in financial
literacy is higher than their expected
performance in mathematics and reading
28
Students' performance in financial
literacy is lower than their expected
performance in mathematics and
reading
28
-25
-15
-5
5
15
25
35
45
55
65
75Slo
vak
Republic
Latv
ia
Italy
Cro
atia
Isra
el
Shanghai-Chin
a
Cze
ch R
epublic
Spain
United S
tate
s
Aust
ralia
Pola
nd
France
OECD
ave
rage-1
3
Est
onia
Flem
ish C
om
munity
(Belg
ium
)
Slo
venia
New
Zeala
nd
Learning financial literacy through experience: Relevance of bank account holding (accounting for socio-demographics)
On average across OECD countries and economies, students who hold a bank account score 21 points higher than students with similar socio-economic status who do not.
29
0
10
20
30
40
50
60
70
80
90
Est
onia
Shanghai-Chin
a
Flem
ish C
om
munity
(Belg
ium
)
Cro
atia
Latv
ia
Russ
ian F
edera
tion
Pola
nd
Cze
ch R
epublic
Italy
Slo
vak
Republic
Spain
Isra
el
OECD
ave
rage-1
3
Slo
venia
Aust
ralia
Colo
mbia
France
New
Zeala
nd
United S
tate
s
Score-point difference: Students who disagree minus students
who agree with the statement
"When confronted with a problem, I give up easily"
Attitude such as perseverance matters 30
-505
101520253035404550
Colo
mbia
Cze
ch R
epublic
Pola
nd
Isra
el
Flem
ish C
om
munity
(Belg
ium
)
Shanghai-Chin
a
Cro
atia
Italy
Slo
vak R
epublic
Latv
ia
OECD
ave
rage-1
3
Spain
Russ
ian F
edera
tion
Aust
ralia
Est
onia
United S
tate
s
Slo
venia
France
New
Zeala
nd
Statistically significant Not statistically significant 2
Openness to problem solving is also important
Score-point difference: Students who agree minus students who disagree with the statement "I like to solve complex problems"
31
• This first PISA financial Literacy assessment revealed important gaps in the financial literacy skills of students in most countries and room for improvement in all
• It however does not provide a definitive answer as to what model works best to strengthen financial literacy
• More research and future PISA exercises will be instrumental in further exploring and gauging countries’ practices and policies.
The bottom line and next steps 32
Thank you!
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at www.financial-education.org OECD publications, data and instrument
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