Finance is kid’s play for China’s teen boffs

SHANGHAI’s schoolchildren are right on the money. In the first international assessment of financial nous among the young, China’s most populous city leads the field “by a wide margin” compared with teenagers in countries such as the US, France and Italy.

The study by the Organisation for Economic Co-operation and Development (OECD) , the club of mostly rich nations, tested 15-year-olds on basic financial concepts such as bank accounts, savings rates, managing finances and tax.

Shanghai teenagers hit a mean score of 603 points, 103 above the OECD average and 62 points ahead of the next best performer, Flemish Belgium. Five other economies — Estonia, Australia, New Zealand, the Czech Republic and Poland — were above average, but the US, France, Spain and Italy fell below.

The research revealed a worrying lack of knowledge in the young about elementary money matters. More than 15% performed “below the baseline level of proficiency” on the simplest financial ideas. Andreas Schleicher, OECD education and skills director, said 15-year-olds showed a disappointing ignorance of concepts that “are not rocket science”. “If you don’t understand what the long-term liability of an interest rate is for you, you’re much more likely to get ripped off with your credit card. Fifteen years of learning ought to get you to that kind of level,” he said at the study’s launch in London.

Financial literacy had become “an essential life skill” as globalisation and digital technologies made financial services more complex and accessible, the study said. Governments were increasingly devolving financial responsibility for life-changing decisions, such as further education or retirement, to individuals.

Across five levels of understanding, the study found that only one in 10 students in OECD countries were proficient at the top band. In Shanghai, 43% achieved this level, compared with 2% in Italy.

If you don’t understand the long-term liability of an interest rate, you’re much more likely to get ripped off

The two biggest factors behind the stronger performing groups were their pure mathematical ability and whether they had personal experience of finance, such as having a bank account. These findings suggested that the greatest improvements might arise from more maths teaching, rather than financial literacy lessons. “Countries that teach a lot of financial literacy are not actually doing that well,” said Schleicher, citing the US, which performed below average in spite of relatively high levels of classroom finance.

The study was part of three-yearly research into academic ability, called the Programme for International Student Assessment. A separate round of questions about financial literacy was added for the first time in the 2012 study.

Colombia trailed the pack, 121 points behind the OECD average. But researchers said it was unlikely to have performed worse than other poorer nations that did not take part in the study, which involved about 30 000 students in 18 economies.

Schleicher said the UK, which did not participate, would have been unlikely to score highly because of its lower relative performance in maths and science. — © The Financial Times, London

Jeremy Thomas is away