U.S. students rank below average for financial literacy

Jul 9, 2014 by

Here’s the latest lackluster update about U.S. education achievement: American students fall just a little under the international average for financial literacy.

And which country blows the average out of the water? China.

That’s according to the Organization for Economic Cooperation and Development, an international organization that collects economic data from across the world to help improve the global economy.

The OECD’s latest report claims that the financial literacy of a country — which includes students being able to make economic decisions and to decipher documents like invoices and bank statements — is essential to national economies.

“There’s a tale of low-performance in the U.S. that could well be tackled,” said Michael Davidson, who directed the OECD survey — the first of its kind to be conducted internationally.

The U.S. statistically runs in the middle of the pack, with 18% of its students not meeting the baseline level of proficiency to be financially literate.

These students, at best, can explain the difference between needs and wants and can recognize the purpose of financial documents.

On the other end of the spectrum, about 10% of students are top performers, meaning they have a strong grasp on the outcomes of financial decisions and can recognize less evident aspects of finance, such as transaction costs.

By comparison, about 2% of students tested in Shanghai, China, were not at the baseline, and 43% were top performers.

The somewhat discouraging news comes during what has become a lengthy statewide campaign to improve financial literacy.

Wisconsin led the nation in working to improve financial literacy, a movement that has gained momentum after the economy took a nose dive.

“People in general just don’t understand basic finances, and that makes it tough to have a conversation on how to make Wisconsin stronger,” said Jim Morgan, vice president of Wisconsin Manufactures and Commerce.

“It’s a problem, especially if you have people graduating without understanding basic debt and credit.”

For Morgan, the lack of finance literacy partially stems from a lack of uniform policy to increase education in the area.

Morgan co-chaired a task force in 2006 through the Department of Public Instruction that developed financial academic standards for the state, but it did not mandate districts to implement the standards.

DPI reported last September that less than half of Wisconsin school districts require a course in personal finance.

In an effort to spur financial literacy in Wisconsin, Gov. Scott Walker announced in May that the state would distribute about $350,000 in grants for courses to be taught in schools — including $20,000 to Milwaukee Public Schools. That money came from settlement funds received by the state’s Department of Financial Institutions, much of which was designated to increasing financial education.

Still, the grant reached only 26 districts, of 92 that applied.

“You can always do more if you have the money,” Morgan said. “But it’s not that expensive. You just need a little seed money to nudge it forward.”

Because this is the first time the OECD collected data on financial literacy internationally, the report did not express an opinion on the effectiveness of courses dedicated only to personal finance. Davidson suggested in his presentation of the report that many factors may be at play.

For example, there is a strong correlation in the U.S. between high financial literacy and strong performance in math and reading — although, it’s important to note that that is not the case in every country. While U.S. math and reading scores have consistently landed below the international average in previous OECD assessments, China has performed very well.

Davidson suggested that external experiences — such as students having access to bank accounts and cultural factors that motivate students to want to solve complicated problems — may also play a role.

“You really need to have deep thinking skills,” Davidson said. “This goes well beyond reproducing knowledge.”

by Education News
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via U.S. students rank below average for financial literacy.

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