Walk through any major city today, and you'll notice a familiar scene: teenagers looking for the best online deal for their favourite sneakers, streaming music on their phone, or transferring money to friends for yesterday’s lunch. But amidst this digital fluency, one important question remains: do these young people truly understand how to manage their personal finances?
As our latest PISA report on financial literacy shows, more than two thirds* of 15-year-olds are active users of financial products and services. Over 60% have a bank account and/or a payment card, and close to 90% have bought something online during the last 12 months.
However, their levels of financial literacy remain low: one-fifth of students, on average, do not have basic proficiency in financial literacy, meaning that they are not able to apply their knowledge to real life situations involving financial issues and decisions. The fact is many young people simply do not have the knowledge and skills needed to safely navigate the complexities of digital finance.
* Unless stated otherwise, all numbers refer to the average across OECD countries and economies participating in the PISA 2022 financial literacy assessment.
This is particularly troubling when viewed alongside the findings of another recent OECD report on new retail investors in France which shows a surge in financially inexperienced and overconfident young people investing in financial markets. This is concerning and again begs the question of whether young investors are prepared to make sound financial decisions, especially in the digital world.
Financial literacy matters
PISA results show that financial literacy and positive financial behaviour are linked. Students who have better financial literacy skills behave more responsibly financially and are more forward-looking and financially pro-active. High performers in financial literacy are 72% more likely than low performers to save money, and 50% more likely to compare prices in different shops before buying something.
Students’ hands-on experience may give them a valuable opportunity to learn, but the reverse may be true—only those with an interest in finance or a certain level of literacy are likely to seek out these experiences in the first place. Students with an interest in money matters scored 11 points higher on average in financial literacy than those with no interest. Similarly, students who find money matters relevant scored 27 points higher than those did not find them relevant.
This may create a self-reinforcing loop where financially literate students continue to improve their skills, while those who lack foundational knowledge fall further behind.
Opportunities to develop financial skills remain uneven
A further challenge is that access to financial services and the confidence to use them are unevenly distributed. Factors such as socio-economic background, gender and family environment play a significant role in the extent to which a young person feels comfortable using financial tools.
Students from disadvantaged socio-economic backgrounds perform lower in financial literacy, with the background accounting for 12% of the variation in performance. This underlines the importance of giving all students equal opportunities to learn about money than their better-off peers.
The family environment also matters. Students who discuss their saving or purchasing decisions with their parents (68% do so at least once a month) are much more financially literate, giving them an early advantage in developing financial literacy skills.
Boys also tend to have more experience than girls in using financial products and to be more confident dealing with money matters and digital financial services. 60% of boys have sent money using a mobile phone in the previous 12 months compared to 50% of girls, and 61% of boys feel confident making an online money transfer compared to 52% of girls.
What can governments do?
Governments have a critical role to play in ensuring that all students—especially those from under-privileged backgrounds—have the opportunity to develop financial literacy skills. They should promote safe, age-appropriate opportunities for students to learn how to use financial services and make financial decisions.
Governments can help bridge this knowledge gap by systematically incorporating financial literacy into the school curriculum, and ensuring it is taught to all students. This is all the more relevant as PISA shows that students who have been exposed to tasks in schools exploring financial issues perform better in financial literacy. But to do this, they need up to date data on how students are performing. This is why it is essential that they regularly participate in PISA financial literacy assessments, including the next one in 2029.
The OECD’s Recommendation on Financial Literacy and the OECD/European Commission Financial competence framework for children and youth in the European Union also offer practical guidance to help governments leave no-one behind in this important effort. The annual Global Money Week campaign, which this year takes place on 17-23 March, also aim ensures that young people make sound financial decisions.
In a rapidly evolving digital financial world, young people are more exposed to financial products than ever before. However, without the proper education and support, this exposure can do more harm than good. By offering equal opportunities for financial learning and safe engagement, governments can empower the next generation to be confident and smart actors in the financial world.