How do U.S. students rank on financial literacy compared to other nations?
When the results of the latest international test measuring U.S. kids against the rest of the world in math, reading, and science came out back in December, it felt like the country snapped to attention. Kids from China came in #1 in every area, while American students lagged far behind.
I’ve been looking at this issue even more closely over the last few months as a new member of the President’s Advisory Council on Financial Capability. It turns out that during the next round of testing, in 2012, students will also be measured in financial literacy. My first thought: Oh great, now our kids are going to be behind in financial literacy, too! But this isn’t about just another test—it’s about educating kids for a healthy financial life. There’s a growing awareness that financial literacy is a crucial life skill.
I went on The Takeaway this morning to discuss (take a listen), and here are the basics:
1. The test. It’s called PISA (Program for International Student Assessment), and it’s administered every three years to about 500,000 15-year-olds around the world by the Paris-based Organization of Economic Cooperation and Development (OECD).
2. The previous results. In the 2009 test, whose results were released in December 2010, 30 countries scored higher than the U.S. in math, and our scores were significantly below average. We scored beneath countries like Japan and China, but also under Estonia, France, and Canada.
3. The next test. In 2012, PISA will test financial literacy for the first time. They say it will be “the first large-scale international study to assess the financial literacy of young people.” The topic was added for several reasons, including the recognition that our lack of financial literacy contributed to the recent global financial meltdown.
4. The 2012 questions. I spoke with Annamaria Lusardi, chair of the committee that will be writing the test. It’s too early to know the details—the committee is still working on it—but she told me the content areas will be divided into four categories. They are broad enough to have a lot of similarities across international boundaries: Money and Transactions, Planning and Managing Finances, Risk and Reward, and Financial Landscape. That last one relates to general themes like the rights and responsibilities of consumers and the consequences of changes in the economic climate.
5. The ideal test. So what would the perfect test measure in our kids’ abilities to understand how money works? In my view, there are really just a couple of very simple principles that everyone should know. Here’s what it boils down to:
How do you think U.S. students will rate on financial literacy compared to other countries?