OECD EMPLOYER

BRAND

Playbook

1

PISA 2012

Students and Money

Financial literacy skills for the

21st Century

HIGHLIGHTS of

FINDINGS

What is PISA? What is Financial Literacy?

CONTEXT AND DEFINITION

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

3

PISA Financial literacy -definition

PISA has developed the first international framework 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 economic life”.

4

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

purchases have ongoing costs

• …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 fraud

5

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

RELEVANCE

Big decisions start early:

such as continuing

education vs working

Shrinking welfare

systems; increased

personal responsibility

Shifting

demographics-

increased

longevity

Changing labour-markets

and reduced job security

Access to

financial products

at young ages

Increasingly

complex financial

markets

Relevance of financial literacy for 15-year-olds 7

0 20 40 60 80

Shanghai-ChinaCroatia

SpainItaly

LatviaOECD average-13

EstoniaFrance

Slovak RepublicIsrael

Russian FederationSlovenia

United StatesCzech Republic

Flemish Community (Belgium)Australia

New Zealand

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

Students earning money outside of school hours

8

0 20 40 60 80 100

PolandSlovak Republic

IsraelItaly

CroatiaCzech Republic

LatviaUnited States

Shanghai-ChinaOECD average-13

SpainFlemish Community (Belgium)

FranceAustraliaEstonia

New ZealandSlovenia

Percentage of students with a bank account

Many students have a bank account (PISA data) 9

0

10

20

30

40

50

60

70

80

Chin

a

Russ

ian F

edera

tion

Cze

ch R

epublic

Est

onia

Slo

vak R

epublic

Pola

nd

OECD

ave

rage

Germ

any

Aust

ralia

United S

tate

s

Belg

ium

New

Zeala

nd

Isre

al

Italy

Spain

France

2010 or latest available year

1970 or first available year

Their decisions today may impact on their future : Do they recognise the importance of saving for the long-term?

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

Life expectancy is high, and growing. Young people today will need to be

able to support themselves for many years

10

What is in the PISA financial literacy assessment?

THE FRAMEWORK AND ITEMS

Content

Money and

transactions

Planning and

managing finances

Risk and reward

Financial landscape

Processes

Identifying financial

information

Analyse information

in a financial context

Evaluate financial

issues

Apply financial

knowledge and

understanding

Contexts

Education and work

Home and family

Individual

Societal

PISA financial literacy multidimensional

assessment framework 12

http://www.oecd.org/pisa/test/

Take 5 questions from the test yourself 13

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

INVOICE Question 1 Why 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 OFFER

Mrs 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 lona 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 response Description: Recognise positive consequences of transferring a loan to a lower interest rate Content: Planning and managing finances Process: Analyse information in a financial context Difficulty: Full credit: 663 (Level 5); Partial credit: 510 (Level 3)

15

Describing performance levels

Level 5

Level 4

Level 3

Level 2

Level 1 or below

Financial literacy Performance 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 immediately evident. • Work with a high level of accuracy and solve non-routine financial problems • Describe the potential outcomes of financial decisions, showing an understand

ing 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 decisions • Recognise the purpose of everyday financial documents such as an invoice

16

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

THE RESULTS

Strong performance in

financial literacy

Low performance in financial literacy

Average performance

of 15-year-olds in

financial literacy

18

Shanghai-China

Flemish Community (Belgium)

Estonia Australia New Zealand

Czech Republic Poland

Latvia

United States France

Russian Federation Slovenia Spain

Croatia Israel

Slovak Republic Italy

Colombia 375

385

395

405

415

425

435

445

455

465

475

485

495

505

515

525

535

545

555

565

575

585

595

605

Mean score

15%

23%

30%

22%

10%

OECD average-13

Distribution of student performance

625 and above

550 to <625

475 to <550

400 to <475

Less than 400 points

Financial literacy performance levels

Top performers

Baseline

19

Wide skill gaps within countries…

190

290

390

490

590

690

Colo

mbia

Slo

vak

Republic

Isra

el

Italy

France

United S

tate

s

Slo

venia

Cro

atia

Spain

Russ

ian F

edera

tion

OECD

ave

rage-1

3

New

Zeala

nd

Latv

ia

Pola

nd

Cze

ch R

epublic

Aust

ralia

Est

onia

Flem

ish C

om

munity

(Belg

ium

)

Shanghai-Chin

a

Difference 75th and 25th 5th 95th

20

United States

Poland New Zealand

Estonia

Croatia

Latvia

Slovak Republic

Czech Republic

France

Australia

Israel Spain

Slovenia

Colombia

Russian Federation

Italy

R² = 0.1632

370

390

410

430

450

470

490

510

530

550

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

Sco

re p

oin

ts

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

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

Differences only partially explained

by GDP per capita 21

How equitably are learning opportunities distributed?

GROUPS TO BE TARGETED

Are there gender differences in financial literacy?

Italy

350

400

450

500

550

600

650

350 400 450 500 550 600 650

Girls' m

ean s

core

Boys' mean score

Boys perform better than girls

Girls perform better than boys

17

22

28

22

11

14

24

32

22

8

0 10 20 30 40

Level 1

and below

Level 2

Level 3

Level 4

Level 5

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

23

0

2

4

6

8

10

12

14

16

18

20

Esto

nia

Italy

Ru

ssia

n F

ede

ratio

n

Cro

atia

Austr

alia

Fle

mis

h C

om

mu

nity

(Be

lgiu

m)

Pola

nd

Sha

ngh

ai-

Ch

ina

Co

lom

bia

Latv

ia

Czech R

ep

ub

lic

OE

CD

ave

rag

e-1

3

Isra

el

Spa

in

Fra

nce

Slo

ven

ia

United

Sta

tes

Slo

vak R

epu

blic

New

Ze

ala

nd

Financial literacy Mathematics Reading

Pe

rce

nta

ge

of va

riatio

n in

pe

rfo

rma

nce

exp

lain

ed

by s

ocio

-econ

om

ic s

tatu

s

Socio-economic status matters

and in some countries more than for mathematics or reading 24

-40

-20

0

20

40

60

80

100Fr

ance

1

3

Flem

ish C

om

munity

(Belg

ium

) 10

Slo

venia

8

Spain

1

1

Est

onia

1

0

Cze

ch R

epublic

2

OECD

ave

rage-1

3 1

1

Italy

7

Russ

ian F

edera

tion 1

0

New

Zeala

nd

27

United S

tate

s 22

Cro

atia 1

2

Isra

el

17

Latv

ia

3

Aust

ralia

2

0

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 migrants 25

400

450

500

550

600

650

Shanghai-Chin

a

Flem

ish C

om

munity…

Est

onia

New

Zeala

nd

Aust

ralia

Pola

nd

Cze

ch R

epublic

Latv

ia

OECD

ave

rage-1

3

Cro

atia

Spain

Russ

ian F

edera

tion

United S

tate

s

Slo

venia

Slo

vak R

epublic

Isra

el

Italy

Colo

mbia

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

26

How do students develop financial literacy skills ?

IMPORTANCE OF READING AND MATHEMATICS AS

FOUNDATION SKILLS

RELEVANCE OF EXPERIENCE AND ATTITUDES TO DEVELOP THE SKILLS

Isra

el

Colo

mb

ia

Sh

an

gh

ai-C

hin

a

La

tvia

Unite

d S

tate

s

OE

CD

ave

rage

-13

Cro

atia

Po

lan

d

Slo

va

k R

ep

ub

lic

Sp

ain

Esto

nia

Fle

mis

h C

om

mu

nity (

Be

lgiu

m)

New

Zea

lan

d

Russia

n F

ed

era

tio

n

Au

str

alia

Cze

ch

Re

pu

blic

Fra

nce

Ita

ly

Slo

ve

nia

-30

-20

-10

0

10

20

30%

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

28

Students' performance in financial

literacy is lower than their expected

performance in mathematics and

reading

28

-25

-15

-5

5

15

25

35

45

55

65

75Slo

vak

Republic

Latv

ia

Italy

Cro

atia

Isra

el

Shanghai-Chin

a

Cze

ch R

epublic

Spain

United S

tate

s

Aust

ralia

Pola

nd

France

OECD

ave

rage-1

3

Est

onia

Flem

ish C

om

munity

(Belg

ium

)

Slo

venia

New

Zeala

nd

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.

29

0

10

20

30

40

50

60

70

80

90

Est

onia

Shanghai-Chin

a

Flem

ish C

om

munity

(Belg

ium

)

Cro

atia

Latv

ia

Russ

ian F

edera

tion

Pola

nd

Cze

ch R

epublic

Italy

Slo

vak

Republic

Spain

Isra

el

OECD

ave

rage-1

3

Slo

venia

Aust

ralia

Colo

mbia

France

New

Zeala

nd

United S

tate

s

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 30

-505

101520253035404550

Colo

mbia

Cze

ch R

epublic

Pola

nd

Isra

el

Flem

ish C

om

munity

(Belg

ium

)

Shanghai-Chin

a

Cro

atia

Italy

Slo

vak R

epublic

Latv

ia

OECD

ave

rage-1

3

Spain

Russ

ian F

edera

tion

Aust

ralia

Est

onia

United S

tate

s

Slo

venia

France

New

Zeala

nd

Statistically significant Not statistically significant 2

Openness to problem solving is also important

Score-point difference: Students who agree minus students who disagree with the statement "I like to solve complex problems"

31

• This first PISA financial Literacy assessment revealed important gaps in the financial literacy skills 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 32

Thank you!

Find out more about PISA at www.pisa.oecd.org All national and international publications

The complete micro-level database

Find out more about the OECD financial education work

at www.financial-education.org OECD publications, data and instrument

Global of financial education initiatives and research

#oecdFE

Email: Flore-Anne.Messy@oecd.org Pablo.zoido@oecd.org