New data reveals students in the U.S. lack financial savvy; higher ed, economy should worry
Editor’s note: This story has been updated to reflect changes in data.
According to an upcoming report from Junior Achievement and PwC, nearly a quarter of today’s students believe that after they complete college their student loan debt will be forgiven. Yet, 41 percent default on their loans. There’s a financial literacy disconnect going on between reality and today’s students, but it’s not just worrisome for bank accounts—it’s affecting colleges, business and the global economy.
In the Organization for Economic Co-operation and Development’s (OECD) latest global assessment, more than 1 in 6 U.S. teens are unable to make even simple decisions about everyday spending, and only 1 in 10 can solve complex financial tasks.
The OECD’s PISA Financial Literacy assessment, which tested the knowledge and skills of teenagers in dealing with financial issues, such as understanding a bank statement, reveals that U.S. students perform around the average of the countries and economies that participated, ranking somewhere between 8 and 12.
Shanghai-China had the highest average score in financial literacy, followed by the Flemish Community of Belgium, Estonia, Australia, New Zealand, the Czech Republic and Poland (larger view available in the report):
29,000 15 year-old students in 18 countries and economies were tested with the assessment through a 60 minute paper-based test. Students were also asked to participate in a math and reading assessment, and to provide information on their backgrounds, attitudes towards learning, and experience with money and financial products. In the U.S., 1,133 students in 158 schools completed the assessment.
But what’s most interesting about the data is the extreme correlation that happens between other skills for students in the U.S.
Data revealed that skills in mathematics and reading are very closely related to financial literacy, more so in the U.S. than in other countries: Around 80 percent of the financial literacy score reflects skills that can be measured in math and/or reading assessments (compared with the OECD average of 75%), while 20% of the score reflects factors that are uniquely captured by the financial literacy assessment (compared with the OECD average of 25%).
(Next page: What this means for colleges and business)