Global Financial Literacy PISA Report: Financial Education Impacted Greatly by Socio-Economic Factors

Financial education professionals are buzzing over the results of the first-ever global financial literacy study conducted by the OECD Programme for International Student Assessment (PISA), which tested 15-year-olds internationally regarding their understanding of critical personal financial concepts. More than sixty countries and regions participated in the PISA study designed to help identify best practices and serve as the foundation for national financial literacy strategies.

Among the more notable findings of the report is that socioeconomic status influences the success of financial education, with more socio-economically advantaged students scoring significantly higher than less socio-economically advantaged students on average across participating OECD countries and economies. Moreover, socioeconomic status explains about 17 percent of the variation among American students, which is slightly greater than the OECD average.

Socioeconomic status, which typically is measured as a combination of income, education and occupation, historically has been demonstrated to impact education generally. Low socioeconomic status often correlates to less wealth, worse health and substantially limited access to the tools and resources necessary to enhance the quality of life and to have a successful education. While many studies have confirmed this phenomenon in the education industry generally, the PISA study corroborated it within the financial education context in both developed and developing countries.

Financial education proponents contend that there are many factors that contribute to poor financial literacy in areas of low socioeconomic status. In particular, research has shown that youth in low socioeconomic communities develop academic skills at a slower rate than those in higher socioeconomic regions. Moreover, school systems in low socioeconomic areas often have fewer resources, which negatively impacts the ability of students to progress at higher rates. Many professionals also assert that families in low socioeconomic communities are less likely to possess the financial resources or time to provide children with academic support and, therefore, their ability to sharpen skills in financial education and money management is mitigated.

While the PISA scores vary widely among nations, one overall finding with which all financial literacy advocates agree is that young people are not as financially educated as they should be. Only one in seven students in the 13 OECD countries and economies participating in the PISA assessment is able to make even simple financial decisions, while only one in ten can solve complex financial tasks. For this reason, the PISA results underscore the reason why financial education proponents are continuing to promulgate a greater focus on financial literacy all throughout the world.

Additional information regarding the PISA results can be found here.