In a 2012 assessment, US students turned in a lackluster understanding of financial matters while their Chinese peers stood tall.
The test, administered to 29,000 15-year-old students in 18 countries by the Organization for Economic Co-operation and Development (OECD), verified students’ knowledge on all things financial, from banking to how interest rates work.
Other countries that fared well on the exam included Australia, Belgium, Estonia and New Zealand.
According to Melanie Hicken for CNN Money, almost 20% of U.S. students did not even score high enough to reach the base level of proficiency, or as Michael Davidson, the head of early childhood education at the OECD put it, “the basic skills that are needed for success later in life.”
Many are worried about the implications resulting from the exam as financial literacy is increasingly becoming an “essential life skill.”
“If you don’t understand what the long-term liability of an interest rate is for you, you’re much more likely to get ripped off with your credit card. Fifteen years of learning ought to get you to that kind of level,” Andrea Schleicher, OECD education and skills director, said at an event to launch the study in London.
The United States does not currently have a national standard for financial education. This is not true in countries such as Australia where such lessons are included, or Estonia where teachers receive training on the subject.
“If we want to have young people who are globally competitive in 20 years, having a good solid basis of understanding their financial lives early is important,” said Ted Beck, president of the nonprofit National Endowment for Financial Education. “This should be a national priority.”
According to James Pickford for The Financial Times, test results show a strong connection between performance levels and students’ socio-economic status. Although Chinese students ranked the highest, with 43% of students achieving top proficiency, only students from Shanghai, the country’s wealthiest city, took part in the exam. These students averaged a score of 603, 103 points above the OECD average.
Dr. Pushpa Wood, Director of Massey University’s financial education center in New Zealand, is concerned by this connection.
“We can no longer ignore this disparity and must find a way to unlock their untapped potential so they can fully participate in the economic world.”
Dr. Wood proposed creating more financial programs in schools to break the cycle of poverty.
The scores also reflect students’ home lives, according to Post Primary Teachers’ Association president Angela Roberts of New Zealand.
“So kids who’ve got bank accounts, kids who hear a conversation around the dinner table around interest rates and exchange rates and mortgages and things like that are much more likely to have an understanding of financial literacy issues.”
According to the results, those students who hold a bank account achieved higher scores than those who do not have one.
The exam is part of a larger study called the Programme for International Student Assessment, a three-year program carried out by the OECD since 2000.