Rx: Financial literacy
At the start of this school year, let us focus on a neglected part of the curriculum: Financial literacy. Usually buried in the midst of arithmetic or algebra, financial literacy is often ignored when other topics (which appear in national tests) are deemed more pressing.
In 2012, the Program for International Student Assessment (Pisa), under the Organization for Economic Cooperation and Development, tested 15-year-olds in 65 countries in math.
Of these regions, almost 30,000 students in 18 nations were also tested in financial literacy: Shanghai-China, Colombia, Croatia, Czech Republic, Estonia, France, Israel, Italy, Latvia, New Zealand, Poland, Russia, Slovak Republic, Slovenia, Spain and the United States.
The Philippines has never participated in Pisa, and has only taken the Trends in International Math and Science Study twice before, with dismal results.
“Helping young people understand financial issues is important, as younger generations are likely to face ever-increasingly complex financial products and services,” says Pisa. “They are also more likely to have to bear more financial risks in adulthood than their parents, especially in saving, planning for retirement and covering their healthcare needs.”
Disturbing results
How to read a bank statement, what insurance entails, how much a loan costs in the long term were some of the questions.
One in seven students could not make simple decisions about daily spending. Nine in 10 could not complete more complicated financial exercises.
Shanghai-China had the highest average score, followed by the Flemish Community of Belgium, Estonia, Australia, New Zealand, the Czech Republic and Poland. The US was ninth, a bit above Russia.
Gender did not seem to be a factor, as girls generally performed no differently from boys.
But economic status might be: Students in higher SES did much better than their disadvantaged counterparts. Those that did well in math and reading were more likely to do better in financial literacy, but proficiency in math alone or reading alone was not always related to financial proficiency.
Schools
Financial literacy is a relatively new course in the worldwide curriculum, having been taught in many developed nations only in the last decade, through various means: Training teachers, updating curricula, creating mobile apps, celebrating literacy weeks, and so on.
Which methods work best? The jury is still out, but circumstances can play a role. The Czech Republic did well reportedly because when the country moved from communism to capitalism, leaders realized they had to train young people to adapt, especially since reliance on the welfare tate would be eliminated.
New Zealand also did well, probably because of the Commission for Financial Literacy and Retirement Income, which despite its name, has decided to train young people who are still decades from retirement.
“The commission has been overseeing an investment of half a million NZD by the country’s financial sector to build curriculums and learning aids, many of which can be found on a special website available to all teachers,” reports Christopher Schuetz in The New York Times.
Teachers who themselves are financially literate, and who themselves have been trained to teach the subject, are indispensable if we are truly serious in making K-12 reforms work. Financial literacy is now part of our new curriculum.
Some initiatives by the private sector have burgeoned in recent years, and I have done financial literacy projects for banks and other institutions, but these are few and far between, with no sustained support.
Sample questions
Here’s a simple question: Claire and her friends are renting a house. They have all been working for two months. They do not have any savings. They are paid monthly and have just received their pay checks.
They have made a to-do list: Get cable TV. Pay the rent. Buy outdoor furniture. Which task/s is/are likely to need prompt attention from Claire and her friends?
Obvious, wouldn’t you say? Now try this. Natasha works in a restaurant three nights each week. She works for four hours each night and she earns 10 zeds per hour. Natasha also earns 80 zeds each week in tips. Natasha saves exactly half of the total amount of money she earns each week. Natasha wants to save 600 zeds for a vacation. How many weeks will it take Natasha to save 600 zeds?
Not exactly rocket science, but many students could not get the answer. For more questions, go to www.oecd.org/pisa/test/financialliteracytest/
(Queena N. Lee-Chua is on the Board of Directors of Ateneo de Manila University’s Family Business Development Center. Get her book “Successful Family Businesses” at the University Press (email [email protected].) Email the author at [email protected].)
