Lessons from abroad on financial education
National mandates overseas won't fly in decentralized US school system
The U.S. is not alone in its attempts to address financial
literacy in public schools. An international push is on to teach kids the money
skills they need to navigate today's increasingly challenging financial
Financial instruments are much more complex than they were a
generation ago, when credit card usage was limited and debt was confined to a
mortgage and maybe a car loan. The options have multiplied all over the world. "That's
why this is a global movement," says Annamaria Lusardi, distinguished
professor at The George Washington University School of Business and founder of
the Global Financial Literacy Excellence Center. "It's not just the U.S.,
though the U.S. has a more complex economy and has bigger problems than other
countries in my view."
comparisons are tricky
When it comes to the financial know-how of young people, comparing
different countries is difficult. The Organization for Economic Cooperation and
Development for the first time included financial literacy questions on its
for International Student Assessment (PISA), an exam given every three
years to 15-year-olds around the world. (To see how well you fare on some of the OECD's sample questions, take our interactive quiz.) Those results won't be released until
later in 2014. But PISA math results released in December ranked the U.S. at No. 36
-- below average for the 65 countries involved. Since numeracy is tied to
financial literacy, it's not a stretch to predict that American students will
come out somewhere around the middle of the financial literacy results.
A 2012 World Bank report, "Financial Literacy around the World," provides a
glimpse of how adults in different countries compare. It looked at how they
answered three questions that cover basic understanding of compound interest,
inflation and risk diversification. The U.S. ranks near the bottom of seven
high-income countries on the interest and inflation questions, and toward the
middle on the risk problem. The surveys were given in different years and some
countries used variations on the questions, so comparisons are only
Lessons from abroad
As the U.S. tries to tackle financial education, it is keeping a close eye
on what other countries are doing. Teachers in England are required to
incorporate personal finance topics into math classes in 2014, bringing that
country up to the standards of Northern Ireland, Scotland and Wales, where
schools are already required to teach personal finance. Australia is also rolling out a
national financial literacy curriculum in its public schools.
Those kinds of national mandates are not possible in the
U.S. with its decentralized education system. "Australia and the U.K. have
very top down systems where the government says, 'You will put this in your
curriculum,'" says Jeanne Hogarth, vice president of policy at the Center
for Financial Services Innovation and a frequent financial literacy speaker.
"In the U.S., we have a very grass roots approach when it comes to
education. Local school boards decide everything."
The U.S. might draw lessons from New Zealand, whose education
system is also decentralized. New Zealanders scored higher than the residents
of 14 other countries (not including the U.S.) when measured on eight core
financial knowledge concepts by the OECD.
International experts routinely praise the small country for
its initiatives -- it was the first to create an independent website dedicated
to educational resources for consumers (www.sorted.org.nz).
"In the past few years, the government has been putting strong emphasis on
increased financial capability as one of the key elements in improving the
economic health of individuals in the nation," says Pushpa Wood, director
of the Financial Education and Research Centre at Massey University.
Wood points out that other factors probably contribute to
New Zealand's high scores: a small population (about 4.4 million) that is
relatively easy to reach with educational messages and a high proportion of
banked consumers who are engaged with financial products.
Still figuring it out
Wood says there is still much room for improvement. Much like the U.S.,
New Zealand is still feeling its way to a more financially literate public.
According to Wood, financial literacy is included by implication in the
country's core education objectives, which stipulate that a student
should be able to contribute economically to the nation by the time they leave
school. But New Zealand cannot mandate financial literacy classes in public
schools, for reasons similar to those of the U.S. Individual schools
decide whether to teach personal finance topics.
We've seen success in schools that have passionate champions for financial literacy and we're working with them to engage with other schools.
NZ Commission for Financial Literacy and Retirement Income
"We're now adopting a
beachhead strategy," says Malcolm Menzies, group manager of research and corporate services at
New Zealand's Commission for Financial Literacy and Retirement Income. "We've
seen success in schools that have passionate champions for financial literacy
and we're working with them to engage with other schools."
The government is also trying to address another pain point:
teacher confidence. New Zealand is piloting programs to train teachers not only
in the financial knowledge they need to pass on, but also in effective methods
for teaching it. "The holy grail is to have teachers be confident enough
that if a financial question comes up in another class such as social studies,
they can address it," says Menzies.
He would like to see the pilot program expanded, pointing to
Australia, which is pouring millions of dollars into training thousands of
teachers. "If we could put 10,000 teachers through, then we'd be getting
somewhere," he says.
See related: Infographic: Brazil top nation for financial literacy, Visa survey finds
, 5 credit lessons all parents should teach their daughters
, How to teach your son about money
Published: January 9, 2014
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