Welcome to this post about Financial Literacy for Teens!
Hello! My name is Kriti and I am the founder of WhyFI Matter$ (why financial independence matters). WhyFI Matter$ is a global platform for teen financial literacy, so we can hopefully grow up to be financially independent adults! One of my motives for starting WhyFI Matter$, was discovering how much knowledge I lacked when it came to understanding basic financial skills, which consequently made it harder for me to comprehend some global issues going on. But I realized that I am not the only teen who is finding this difficult. Turns out there is an actual financial literacy crisis in teenagers across the world. For this specific post, I am going to focus on the U.S in particular.
Financial Literacy For Teens Test
Every 3 years, the Organization for Economic Cooperation and Development (OECD) conducts a study, which are these PISA tests. The tests include different subjects, such as science, English, and math, but they also have a topic on finance. The most recent test they took was in 2017, and 15 countries participated. There were 29,000 15-year-olds who took the test on finances, where a component of this topic was financial literacy. These tests have 5 levels, where 1 is the easiest and 5 is the hardest. The questions on the tests are aimed at targeting everyday financial situations teens and adults might face. Questions can range from shopping for clothes to comparing phone plans and managing bank accounts. As you can see, it is not anything Wall Street level, and something the everyday person might encounter.
Now you are probably wondering, “well what were the actual results?”. The results showed that 25% of students in all countries could not do the basic questions. Only 1/10 students could accomplish a complex question. 20% of students in the US were not able to do the basic financial literacy levels. Among 15-year-olds, the US scored a bit lower than the average. Is this not completely puzzling! The US is supposed to be one of the leading countries in education, but the US cannot perform higher in financial literacy tests. This might seem less outrageous than if we scored less on a math test, but understanding financial concepts is actually a skill we need to thrive in life.
China was the highest, but only kids in Shanghai took the test. So, the performance does not account for China as a whole. Following China was Belgium and then Canada. China (Shanghai) is able to do better than the rest of the world because they require financial literacy classes in school. Conversely, in the US, only 17 states mandate finances to be a part of the curriculum in schools. Essentially there needs to be a reform in the education system in the US, with students acquiring useful financial knowledge. Many parents in the US expect their children to learn this in school, but that clearly is not the case.
The small number of kids who performed well on these tests had bank accounts, debit cards, and were wealthier than the others. This right here is financial exclusion. According to the World Bank, what makes up most of the 1.7 billion people in the world who are underbanked are women and younger people. The fact that many people in this world do not have access to financial services is just a perpetrator of poverty.
Parents Teaching About Money
Another reason for some teens not scoring as well as their peers, is the transparency of money at home. Some parents take an active role in educating their children about the financial system, while others do not. Similar to the financial exclusion data that women experience more underbanking compared to men, this OECD study revealed that teen funds vary based on gender. Girls receive more money through gifts and allowances, whereas boys receive more money by working and extracurricular jobs. This shows how boys are dealing with financial situations at an earlier age than girls, so they have accumulated these experiences and learned from them. This also explains why boys can become financially independent at an earlier age than girls.
The results and data from these tests are extremely important. The scores from 2012 to 2017 have stayed stagnant, which shows how no steps have been taken to improve financial literacy among teens in the US. Issues such as student loan debt are one of the biggest hurdles America is facing. Yet, a little more financial literacy in society could help alleviate this problem. This is a little disheartening seeing as financial literacy is an extremely important skill teens in America need. This is because the US is a consumer based society, and teens are some of the biggest contributors to this.
Important of Financial Literacy
Imagine what would happen if literally no teen was financially literate. It would be a complete disaster. So it is better if more and more teens become financially literate in order to sustain a stable society. There needs to be policy reformation, but some small steps you can take are to start talking to your parents about it more, or maybe even ask your school to provide a court on it. Keep on reading blogs like Teen Financial Freedom or read and listen to WhyFI Matter$ (https://www.whyfimatters.com/). Along with that, I highly suggest reading this book: The Money Club: A Teenage Guide to Financial Literacy.
Also, while you’re at it, maybe you should try some of the sample questions for the financial PISA test on the OECD webpage (www.oecd.org) so you can understand where you stand in terms of financial comprehension and literacy so that you can keep improving. Thanks for reading and hope us teens in the US can score better come 2023!
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