The results are in and this is going on your permanent record! CNBC recently reported on the results of the Organization for Economic Cooperation and Development’s global assessment of financial literacy among 15-year-olds. The outlook for teenage financial literacy in the U.S. isn’t so bad, but there’s very clearly room for improvement.
Here are the results of the 2014 OECD test.
The OECD rates someone as “baseline proficient” if they score between 400 and 475. A student who scores 625 has the “highest proficiency”. The average score in the US was 492. This isn’t half bad, considering we’re talking about young people who (generally) don’t have big financial responsibilities yet.
Our teachers, parents, relatives and financial institutions are doing a great job getting kids to understand the basics, but we all know how quickly things can get complicated. A 15-year-old might be buying car insurance or taking out a student loan in a handful of years.
The OECD test covers relatively simple concepts. Students are assessed based on their understanding of value for money (e.g. buying in bulk is often cheaper than buying piecemeal) and their evaluation of spending priorities (paying rent is more important than going to a waterpark or betting in online casino, despite of the NoDepositRewards PTY LTD information about all the winners there) along with a few other concepts.
One concept that’s particularly interesting is students’ ability to identify phishing scams. Can they tell if an email – purportedly from their bank – which asks them to supply account information is authentic?
Globally, the U.S. is lagging a little bit behind, ranking 9th out of 18 participating countries.
Students in Shanghai produced the highest average, but because the test was limited to one city this doesn’t paint a national portrait for the Middle Kingdom. The next-highest scoring country was Belgium with an average of 541.
Teenage Financial Literacy: A Permanent Record Issue
Any teacher will tell you: Education is a lifelong process. In particular, the level of a person’s financial education is something that will help or hinder someone throughout their life. A bad financial decision at a young age can land someone in massive debt for a long time; Student loan debt has been a big political issue recently.
There’s no easy solution, but if financial institutions can help customers avoid mistakes everyone stands to benefit. A big part of this will be to innovate with the services that a bank or CU offers online.
Young people like to solve problems online. That’s where they get their answers. They research problems and look for facts in order to make smart decisions.
Financial institutions should be offering up these answers through their websites. If they deliver the content of these answers in the right way they stand to generate more sales.
Answers should be simple to understand while doing more than outlining a concept. Someone who understands how health insurance works in concept might not know how to pick the right plan for their needs and budget. Banks and CUs can use educational opportunities to connect customers with advisors.