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New study focuses on teens’ financial literacy

By Linda Conner Lambeck
Connecticut Post

            When it comes to managing money, the nation’s 15 year olds can hold their own against the world, but just barely. 
            A new, first-of-its-kind financial literacy study conducted by the Program for International Student Assessment---the group that annually tells us how lackluster American teens are when it comes to reading, math and science----was released last week.  It shows that U.S.  teens scored statistically in the middle of the pack on a two-hour, paper-and-pencil test that looked at how well they know, understand and can use financial concepts.
            The test was given to a representative sample of about 29000 students in 18 countries and regions.  Shanghai, China, came in first, by a wide margin.  Not only did China’s 15-year-old’s have the highest average score on the test---603 compared to the U.S.’ 495 ----but a whopping 43 percent of Chinese students scored in the top performing level, compared to 9 percent of U.S. students.  In the top level, students can not only balance checkbooks and read a bank statement, they can also understand the implications of income tax brackets. 
            One “easy” question from the test showed students an invoice for a store purchase and asked why it was sent.  The correct answer was that it was a bill that had to be paid.
            A “harder” question asked students about refinancing a loan with a lower interest rate.  If they thought it was a good idea, they had to say why.
            Michael Davidson, who heads the early childhood and schools division of PISA, said the idea behind the test was not just to test knowledge but to assess what students can do with what they know. 
            Financial literacy is considered important, since young people are increasingly making decisions about purchases and soon will have to decide if going to college is worth the amount of debt they will be taking on. 
            Other countries that scored above the international average include Australia, Belgium, the Czech Republic, Estonia, New Zealand and Poland.  Columbia came in dead last with a score of 378.
            The results also show that:
            Across the world, boys tended to score higher than girls.
            While 90 percent of 15-year olds in Slovenia and New Zealand have bank accounts, only 51 percent of students in the U.S. do.
            U.S. teens are far more astute when it comes to online shopping, with more than 70 percent saying they have made online payments, placing them fourth among participating nations.  
            Bridgeport, Ct’s Interim Schools Superintendent Fran Rabinowitz said financial know-how isn’t addressed as much as it should be.
            “Students should learn what a good buy is and how to manage a pay check,” she said.  In too many school districts, consumer science has fallen by the wayside, she said.
            It is too soon to tell, Davidson said, how to improve the results, basically because financial literacy instruction is still a relatively new concept in many places.  But there appears to be a correlation between socio-economic background and financial literacy.
            Kids who have bank accounts know more about money than kids who don’t.  Another strong correlation can be drawn between perseverance and financial literacy.  Kids who don’t give up easily tended to score better on the test than kids who do.
            But “it is not a causal link,” Davidson said in a web conference with reporters last week. 
            The test will be given again in 2015, this time via computer.

            Distributed by MCT Information Services.