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1

PISA 2012Students and MoneyFinancial literacy skills for the 21st Century

HIGHLIGHTS

9 July 2014

Launch

What is PISA? What is Financial Literacy?

CONTEXT AND DEFINITION

3 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

4 PISA in brief

PISA has developed the first international frame-work 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 eco-

nomic life”.

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 pur-chases have im-

plications

• …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 risk

and fraud

5

Why does financial literacy matter to 15-year-olds?

RELEVANCE

7

Big decisions start early: such as continu-ing education vs work-

ing

Shrinking welfare systems; increased personal respons-

ibility

Shifting demographics-

increased longevity

Changing labour-mar-kets and reduced job

security

Access to fin-ancial

products at young ages

Increasingly complex finan-

cial markets

Relevance of financial literacy for 15-year-olds

8

Shanghai-ChinaCroatia

SpainItaly

LatviaOECD average-13

EstoniaFrance

Slovak RepublicIsrael

Russian FederationSlovenia

United StatesCzech Republic

Flemish Community (Belgium)Australia

New Zealand

0 10 20 30 40 50 60 70 80

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 occa-sional

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

Students earning money outside of school hours

9

PolandSlovak Republic

IsraelItaly

CroatiaCzech Republic

LatviaUnited States

Shanghai-ChinaOECD average-13

SpainFlemish Community (Belgium)

FranceAustralia

EstoniaNew Zealand

Slovenia

0 10 20 30 40 50 60 70 80 90 100

Percentage of students with a bank account

Many students have a bank account (PISA data)

10

Chin

a

Russ

ian F

edera

tion

Cze

ch R

epublic

Est

onia

Slo

vak R

epublic

Pola

nd

OEC

D a

vera

ge

Germ

any

Aust

ralia

Unit

ed S

tate

s

Belg

ium

New

Zeala

nd

Isre

al

Italy

Spain

Fra

nce

0

10

20

30

40

50

60

70

80

2010 or latest available year

1970 or first available year

Their decisions today will impact their future financial wellbeing:

Source: OECD Factbook 2013: Economic, Environmental and Social Statistics - © OECD 2012

Life expectancy is high, and has been growing for the last decade.Young people today will need to be able to support themselves for many years.

What is in the PISA financial literacy assessment?

FRAMEWORK AND ITEMS

12

Content

Money and transac-tions

Planning and man-aging finances

Risk and reward

Financial landscape

Processes

Identifying financial information

Analyse information in a financial con-

text

Evaluate financial issues

Apply financial knowledge and un-

derstanding

Contexts

Education and work

Home and family

Individual

Societal

PISA financial literacy assessment framework

13

http://www.oecd.org/pisa/test/   

Take 5 questions from the test yourself

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: 360The task is to recognise the purpose of an invoice Content: Money and transactionsProcess: Identify financial information

INVOICE Question 1Why 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 OFFERMrs 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 loan 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 responseDescription: Recognise positive consequences of transferring a loan to a lower interest rateContent: Planning and managing financesProcess: Analyse information in a financial contextDifficulty: Full credit: 663 (Level 5)

15

16

SHARESThis graph shows the price of one Rich Rock share over a 12-month period.

Rich Rock Share Price

SHARES - Question Which statements about the graph are true?

Sample Question: SHARES

The best month to buy the shares was September. True / FalseThe share price increased by about 50% over the year. True / False

Price (zeds)

Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May

Time (months)

Question type: Complex Multiple ChoiceDescription: Analyse information in a financial context by considering the information in a line graph about an in-vestment productContent: risk and reward Process: analyse information in a financial context Difficulty: 545 (Level 3)

16

Describing performance levels

Level 5

Level 4

Level 3

Level 2

Level 1 or below

Financial literacyPerformance

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 immedi-ately evident.

• Describe the potential outcomes of financial decisions, showing an un-derstanding 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 deci-

sions • Recognise the purpose of everyday financial documents such as an in-

voice

17

How well prepared are young people to make complex financial decisions?

THE RESULTS

Strong performance in financial literacy

Low performance in financial literacy

Average performanceof 15-year-olds in

financial literacy

19

375

385

395

405

415

425

435

445

455

465

475

485

495

505

515

525

535

545

555

565

575

585

595

605 Shanghai-China

Flemish Community (Belgium)

EstoniaAustraliaNew Zealand

Czech Republic PolandLatvia

United StatesFrance Russian FederationSlovenia SpainCroatiaIsrael

Slovak RepublicItaly

Colombia

Chart TitleMean score

15%

23%

30%

22%

10%

Series2

Distribution of student performance

625 and above

550 to <625

475 to<550

400 to <475

Less than 400

points

Financial literacyperformance levels

Top performers

Baseline

20

Wide skill gaps within countries…

Co

lom

bia

Slo

vak

Re

pu

blic

Isra

el

Ita

ly

Fra

nce

Un

ite

d S

tate

s

Slo

ven

ia

Cro

ati

a

Sp

ain

Ru

ssia

n F

ed

era

tio

n

OE

CD

ave

rag

e-1

3

Ne

w Z

ea

lan

d

Latv

ia

Pola

nd

Cze

ch R

ep

ub

lic

Au

stra

lia

Est

on

ia

Fle

mis

h C

om

mu

nit

y (B

elg

...

Sh

an

gh

ai-

Ch

ina

190

290

390

490

590

690

Difference 75th and 25th 5th 95th

21

9 000 14 000 19 000 24 000 29 000 34 000 39 000 44 000 49 000370

390

410

430

450

470

490

510

530

550

United States

PolandNew Zealand

Estonia

Croatia

Latvia

Slovak Republic

Czech Republic

France

Australia

IsraelSpain

Slovenia

Colombia

Russian Federation

Italy

R² = 0.163200959916093

Per capita GDP (USD converted using PPPs), 2010 or the latest year

Sco

re p

oin

ts

GDP per capita explains only 16% of the country level variation in financial literacy

Differences only partially explained by GDP per capita

22

How equitably are learning opportunities distributed?

GROUPS TO BE TARGETED

Are there gender differences in financial literacy?

350 400 450 500 550 600 650350

400

450

500

550

600

650

Boys' mean score

Gir

ls' m

ean s

core

Boys perform better than girls

Girls perform better than boys

Level 1 and below

Level 2

Level 3

Level 4

Level 5

0 5 10 15 20 25 30 35

17

22

28

22

11

14

24

32

22

8

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

24

Est

on

ia

Italy

Ru

ssia

n F

ed

era

tion

Cro

atia

Au

stra

lia

Fle

mis

h C

om

mu

nity

...

Po

lan

d

Sh

an

gh

ai-

Ch

ina

Co

lom

bia

La

tvia

Cze

ch R

ep

ub

lic

OE

CD

ave

rag

e-1

3

Isra

el

Sp

ain

Fra

nce

Slo

ven

ia

Un

ited

Sta

tes

Slo

vak

Re

pu

blic

Ne

w Z

ea

lan

d

0

2

4

6

8

10

12

14

16

18

20

Financial literacy Mathematics Reading

Pe

rce

nta

ge

of v

ari

atio

n in

pe

rfo

rma

nce

e

xpla

ine

d b

y so

cio

-eco

no

mic

sta

tus

Socio-economic status matters and in some countries more than for mathematics or reading25

Fra

nce

1

3

Fle

mis

h C

om

mu

nit

y (

Belg

ium

)

10

Slo

ven

ia

8

Sp

ain

1

1

Est

on

ia

10

Cze

ch R

ep

ub

lic

2

OEC

D a

vera

ge-1

3

11

Italy

7

Ru

ssia

n F

ed

era

tion

1

0

New

Zeala

nd

2

7

Un

ited

Sta

tes

2

2

Cro

ati

a

12

Isra

el

17

Latv

ia

3

Au

stra

lia

20

-40

-20

0

20

40

60

80

100

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 migrants26

Sh

an

gh

ai-

Ch

ina

Fle

mis

h C

om

mu

nit

y

(Be

lgiu

m)

Est

on

ia

Ne

w Z

ea

lan

d

Au

stra

lia

Po

lan

d

Cze

ch R

ep

ub

lic

La

tvia

OE

CD

ave

rag

e-1

3

Cro

ati

a

Sp

ain

Ru

ssia

n F

ed

era

tio

n

Un

ite

d S

tate

s

Slo

ve

nia

Slo

va

k R

ep

ub

lic

Isra

el

Ita

ly

Co

lom

bia

400

450

500

550

600

650

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

27

How do students develop financial literacy skills ?

Importance of reading and mathematics as foundation skills

Relevance of experience and attitudes

-30

-20

-10

0

10

20

30

Fra

nce

Italy Slo

ven

ia

Isra

el

Co

lom

bia

Sh

an

gh

ai-

Ch

ina

La

tvia

Un

ited

Sta

tes

OE

CD

ave

rag

e-1

3

Cro

atia

Po

lan

d

Slo

vak

Re

pu

blic

Sp

ain

Est

on

ia

Fle

mis

h C

om

mu

nity

(B

elg

ium

)

Ne

w Z

ea

lan

d

Ru

ssia

n F

ed

era

tion

Au

stra

lia

Cze

ch R

ep

ub

lic

%

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

29

Students' performance in financial literacy is lower than their expected

performance in mathematics and reading

29

200 300 400 500 600 700 800200

300

400

500

600

700

800

Relative financial literacy performance when compared to mathematics

Financial literacy performance

Mathematics performance

Average relationship between financial

literacy and mathematics performance

Australia performs better-than-expected in financial literacy. The difference between observed and expected

performance is larger among strong performers in mathematics

The Czech Republic perform better-than-expected in financial literacy. The difference between

observed and expected performance is larger among low

achievers in mathematics France’s performance is lower-than-expected in financial literacy. The gap

between observed and expected performance is similar at all levels of

mathematics performance.

30

Italy’s performance is lower-than-expected in financial literacy. The

gap between observed and expected performance is wider

among high achievers in mathematics.

Students in the Flemish community (Belgium) and

Israel perform as high as expected in financial literacy at

all levels of mathematics performance

30

31

Slo

vak

Re

pu

blic

Latv

ia

Ita

ly

Cro

ati

a

Isra

el

Sh

an

gh

ai-

Ch

ina

Cze

ch R

ep

ub

lic

Sp

ain

Un

ite

d S

tate

s

Au

stra

lia

Pola

nd

Fra

nce

OE

CD

ave

rag

e-1

3

Est

on

ia

Fle

mis

h C

om

mu

nit

y (B

elg

ium

)

Slo

ven

ia

Ne

w Z

ea

lan

d

-25

-15

-5

5

15

25

35

45

55

65

75

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.

Est

on

ia

Sh

an

gh

ai-

Ch

ina

Fle

mis

h C

om

mu

nit

y (B

elg

ium

)

Cro

ati

a

Latv

ia

Ru

ssia

n F

ed

era

tio

n

Pola

nd

Cze

ch R

ep

ub

lic

Ita

ly

Slo

vak

Re

pu

blic

Sp

ain

Isra

el

OE

CD

ave

rag

e-1

3

Slo

ven

ia

Au

stra

lia

Co

lom

bia

Fra

nce

Ne

w Z

ea

lan

d

Un

ite

d S

tate

s

0102030405060708090

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 32

Co

lom

bia

Cze

ch R

ep

ub

lic

Po

lan

d

Isra

el

Fle

mis

h C

om

mu

nit

y (

Be

lgiu

m)

Sh

an

gh

ai-

Ch

ina

Cro

ati

a

Ita

ly

Slo

va

k R

ep

ub

lic

La

tvia

OE

CD

ave

rag

e-1

3

Sp

ain

Ru

ssia

n F

ed

era

tio

n

Au

stra

lia

Est

on

ia

Un

ite

d S

tate

s

Slo

ve

nia

Fra

nce

Ne

w Z

ea

lan

d-10

0

10

20

30

40

50

Statistically significant Not statistically significant 2

Openness to problem solving is also important

Score-point difference: Students who agree minus stu-dents who

disagree with the statement "I like to solve complex prob-lems"

33

• This first PISA Financial Literacy exercise revealed important gaps in the financial competencies 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 34

Thank youFind out more about PISA at www.pisa.oecd.org

All national and international publicationsThe complete micro-level database

Find out more about the work of the OECD on financial at www.financial-education.org

OECD publications, data and instrumentsDatabases of financial education initiatives and research

Email: Adrian.BLUNDELL-WIGNALL@oecd.orgFlore-anne.MESSY@oecd.org

Michael.DAVIDSON@oecd.org