Do U.S. Students Understand the Value of a Dollar?

If, as many believe, financial literacy is a 21st century skill that all students need to grasp, how do U.S. students stack up against their counterparts in other nations? Once again, about average, according to the Organization for Economic Cooperation and Development (OECD).

For the first time ever, OECD tested students around the world on their knowledge of personal finances as part of the Programme for International Student Assessment (PISA ) and released the results this week. About 29,000 15 year-olds in 13 countries and economies participated, and were assessed on their ability, for example,to understanding a bank statement, the long-term cost of a loan or knowing how insurance works.

“Developing financial literacy skills and knowledge is critical now that individuals are becoming increasingly responsible at an ever earlier age for financial risks affecting their future,” said OECD Secretary-General Angel Gurría. “Some governments have started developing strategies and policies so that people have the skills they need throughout their lives. More need to move this up the policy agenda so that citizens are prepared for an ever-more complicated financial world.”

Generally, few of the countries represented scored off the charts. Only one in seven students who took the test are unable to make even simple decisions about everyday budgetary matters, and only one in ten can solve “complex financial tasks.” Shanghai-China ranked the highest, followed by the Flemish Community of Belgium, Estonia, Australia, New Zealand, the Czech Republic and Poland.

In the United States, slightly less than 10 percent  of students were able to answer the most difficult questions on the test and  18 percent, compared to 15 percent of OECD students overall, did not rank as generally proficient in financial literacy. They most they could muster is the ability to make simple decisions on day-to-day spending and understand basic financial documents (i.e., an invoice).

One in ten U.S. students ranked as  top scorers. These students are those, according to OECD. “who can look ahead to solve financial problems or make the kinds of financial decisions that will be only relevant to them in the future. They can take into account features of financial documents that are significant but unstated or not immediately evident, such as transaction costs, and can describe the potential outcomes of financial decisions.”

About 50 percent of 15-year-old students in the United States say they have a bank account, and they performed better than those who do not – an advantage that is glaring when socioeconomic status is factored into the equation. Only 32 percent of disadvantaged students, compared to the more than 70 percent  of advantaged students, hold such an account. More affluent students performed significantly better on the assessment than students from lower income backgrounds. Although this gap was highest in the United States, it is evident in all participating countries.

According to the report, in countries where financial education is available, it is usually  integrated in other subjects or it is taught as a cross-curricular subject. The exception is the United States, which ranked first in teaching financial literacy as a separate subject.