Painfully Average: What Will It Take for American Teens to do Better?

American teen rate average in financial literacy

When the long-awaited results of the Programme for International Student Assessment (PISA) were revealed July 9, U.S. teenagers ranked in the middle of the 18 participating countries and econo­mies in financial literacy aptitude.

“We certainly were disappointed, but not surprised,” says NEFE CEO Ted Beck. “We didn’t expect to be on the medal stand—we assumed we’d only be getting a participation ribbon.” One national journalist told Beck the United States is “painfully average.” Beck says, “This is not where we want to be as a country.”

American 15-year-olds’ mean score ranked between eighth and 12th in the first PISA 2012 financial literacy assessment, which was administered to approximately 29,000 students in 18 countries and economies. Shanghai-China had the highest mean score. Colombia had the lowest.

The Global Financial Literacy Excellence Center (GFLEC) in Washington, D.C., hosted the PISA release in the U.S., and the Organisation for Economic Co-operation and Development (OECD) presented the findings in Paris.

The quality and quantity of U.S. financial education certainly affects test scores. Not surprisingly, however, the study found students’ financial literacy is directly related to their competency in mathematics and reading. PISA ranked the United States below average in math and average in reading among the 65 participating countries in the 2012 assessment.

“We need to take an honest look at the work we do and set the bar higher,” says Beck. “We can’t settle for second-rate results.”

Quality Financial Education:What Works

First-rate results require five key factors: a well-trained educator (and/or tested e-learning protocol) to facilitate learning; vetted/evaluated program materials, timely instruction, relevant subject matter, and evidence/evaluation of impact. “Ample research proves that we need these components—all of these components—to make financial education work,” says Billy Hensley, Ph.D., NEFE’s director of education.

 
PISA data release in July.
 NEFE President and CEO Ted Beck with Annamaria Lusardi, David J. Cowen, Alan Krueger, and Lisa Krueger at the PISA data release in July.

Naysayers have positioned the recent NEFE-funded study, The Effect of Financial Literacy and Financial Education on Downstream Financial Behavior, as proof financial education doesn’t work. Although small, the effect of financial education on positive financial behaviors is statistically significant.

However, this meta-analysis counted pretty much anything as financial education—high school courses and units, counseling, seminars, workshops, newsletters, pamphlets, and fairs—and had no way of measuring the efficacy of the instructors’ backgrounds. “Obviously, 50 hours of classroom financial education will outperform glancing at a pamphlet,” says Hensley. “It’s lazy to say financial education doesn’t work. Instead of picking out tactics that haven’t worked, we need to recalibrate to build upon interventions where success has been documented.”

Focus on Effective Teacher Training

Although 89 percent of K-12 teachers believe financial education is important, only 19 percent of those same teachers feel competent to teach personal finance, according to a NEFE-funded 2010 University of Wisconsin-Madison study. “The financial education community really stepped up to address this deficit. Now they need to continue,” says Beck.

The Jump$tart Teacher Training Alliance (J$TTA) developed, piloted, evaluated, and refined a training program focused on personal finance subject matter. Knowledge, confidence, and behaviors improved dramatically. Teachers who agreed they have the knowledge necessary to effectively teach their students about personal finance increased from 38 percent to 80 percent. Teachers who had integrated financial education into their classroom instruction rose from 61 percent to 90 percent.

“We can learn from other academic disciplines,” says Hensley. “Schools, school districts, and states have experience raising performance in math, reading, and science. No one has had to do that for financial education because there has been very little accountability.”

Evaluation Promotes Continuous Improvement

Financial educators want to know that their programs have impact. Yet creating a culture of evaluation in the community faces many barriers: lack of capacity, lack of standard metrics, and benchmarks, too much jargon, and limited expertise in evaluation practices. “Evaluation promotes continuous improvement,” says Hensley, “and helps demystify the myth that there is one programmatic approach to financial capability.”

“Frankly, the community is overdue in committing time and money to setting and applying rigorous evaluation standards to current programs,” says Beck. “It’s time to stop basing our work on anecdotes and now build upon what has been evaluated and proven through rigorous research. We need to put aside the focus on creating new, duplicative resources such as curricula and teacher training, so we will learn more about what works and put it into practice faster.”

Talk to Your Kids About Money

“Parents are the single greatest influencers of positive financial behaviors in their children,” says Beck, referring to the NEFE-funded longitudinal study at the University of Arizona. Researchers found that even if parents are not good at managing money themselves, their positive expectations still build positive behaviors in their children. “Talk to your kids about money,” says Beck. “There are masses of resources to help start those conversations.”

Leverage Current National Focus

The White House and many federal agencies now are making financial capability a priority. President Barack Obama appointed his second President’s Advisory Council on Financial Capability for Young Americans this year. The PISA results involved numerous national leaders in government, business, nonprofits, and media.

“We need to take advantage of the spotlight we have right now to engage all the players needed to embed financial capability system-wide: in schools, in our homes, in our communities, at our jobs—everywhere people are, financial education should be there too,” says Beck.


Contacts

  • Paul Golden

    Media Relations Director

    Direct: 303-224-3514
    Cell: 303-918-3620
    [email protected]

  • Patricia (Pat) Seaman

    Senior Director of Marketing and Communications

    Direct: 303-224-3538
    [email protected]

Contacts

  • Paul Golden

    Media Relations Director

    Direct: 303-224-3514
    Cell: 303-918-3620
    [email protected]

  • Patricia (Pat) Seaman

    Senior Director of Marketing and Communications

    Direct: 303-224-3538
    [email protected]