How U.S. Teens Rank in Financial Literacy

Results of an international study of the financial savvy of teenagers around the world are in, and the verdict for the U.S. is disappointing, if not surprising: Our kids are right in the middle of the pack.

The study, conducted by the Programme for International Student Assessment (PISA), under the auspices of the Organisation for Economic Cooperation and Development (OECD), involved 29,000 15-year-olds in 18 countries. The students took an hour-long paper-based test designed to measure how young people deal with such things as monetary transactions, taxes, savings, risk and reward.

At the head of the class were Shanghai-China, the Flemish Community of Belgium, Estonia, Australia, New Zealand, the Czech Republic and Poland. The U.S. ranked between eighth and 12th on various measures—in the ballpark with Croatia, France, Israel, Latvia, the Russian Federation, Slovenia and Spain. Bringing up the rear were the Slovak Republic, Italy and Colombia.

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Aside from the standings, the study turned up a number of noteworthy findings regarding the United States:

-- In the U.S., 9.4% of students performed at the highest of five possible levels. That was about even with the 9.7% average across all the countries but far below the 43% of Shanghai students who performed at that level.

-- At the other end of the spectrum, 17.8% of U.S teens didn’t reach the baseline level of proficiency, compared with an overall average of 15.3%.

-- There was an insignificant one-point difference in the scores of boys and girls.

-- In the U.S. (though not necessarily in other countries), financial literacy is strongly correlated with performance in mathematics and reading, also measured by PISA in other exams.

-- Students who have a bank account scored appreciably higher on the exam.

-- Students with at least one parent in a skilled occupation (such as engineer, chef or midwife) performed better than students whose parents have semi-skilled or elementary occupations (such as machine operator, farmhand or porter). Students with at least one parent working in a finance-related occupation did better than students of similar socioeconomic status whose parents work in other occupations.

Common ground. Aside from the worldwide breadth of the study, what set this assessment apart was its effort to come up with practical questions that 15-year-olds around the globe could be expected to answer. “The hardest thing was to find areas that all the countries had in common,” says Annamaria Lusardi, academic director of the Global Financial Literacy Excellence Center at George Washington University, who chaired the group that developed the methodology. “Some countries don’t use credit cards, and pension systems can be very different.”

Instead of asking direct questions about such things as credit and pensions, the group focused on how students would handle real-life situations, such as reading a pay stub or deciphering a store invoice (try your hand at some sample questions).

Test results were released in the U.S. at a daylong conference at GWU. Despite the lackluster performance of U.S. students, the tenor of the conference was upbeat. “U.S students have been exposed to financial literacy, but they didn’t do as well on the exam because they don’t have a good basic understanding of concepts such as risk and probability,” said Andreas Schleicher, director of the OECD’s Directorate for Education and Skills.

Schleicher thinks that could be remedied if students developed thinking skills by taking a deeper dive into fewer subjects—a theme echoed by U.S. Education Secretary Arne Duncan, who noted that classes in the U.S. are often “a mile wide and an inch deep.”

Next: How financial literacy can be taught effectively in schools.