NEW YORK (MainStreet) Being smart in matters of money can give you a lifetime edge. And we know that financial habits form early. But American teens are strictly average when it comes to financial literacy, according to results of the Program for International Student Assessment (PISA).
Compiling the scores of 29,000 15-year-old students from 18 countries, the Organization for Economic Cooperation and Development (OECD) found the brightest young financial minds to be in Shanghai-China, followed by Belgium, Estonia, Australia, New Zealand, the Czech Republic and Poland.
The test included questions regarding matters as simple as being able to read and interpret an invoice and transaction costs as well as calculating the balance in a bank statement and interpreting the implications of income-tax brackets.
There were few "gender gaps" in male and female scores. "In all participating countries and economies, except Italy, there are no differences in average financial literacy scores between boys and girls," the PISA report said. "Across OECD countries and economies, there are more top-performing boys than girls, and more low-performing boys than girls, in financial literacy."
The sophistication of global teen consumers may come as a bit of a surprise. The study found more than 70% of the 15-year-old students in Australia, Belgium, Estonia, France, New Zealand and Slovenia hold a bank account. Yet in Israel, Poland and the Slovak Republic, fewer than 30% do.
U.S. teens ranked mostly in the middle of all countries and economies. The mean scores of six countries, including France, Israel, Italy, the Slovak Republic, Slovenia and Spain, were significantly lower than the OECD average.
Here is a sample problem:
Mrs. Jones has a loan of 8,000 zeds with FirstZed Finance. The annual interest rate on the loan is 15%. Her repayments each month are 150 zeds. After one year Mrs. Jones still owes 7,400 zeds. Another finance company called Zedbest will give Mrs. Jones a loan of 10,000 zeds with an annual interest rate of 13%. Her repayments each month would also be 150 zeds.
If she takes the Zedbest loan, Mrs. Jones will immediately pay off her existing loan. What are two other financial benefits for Mrs. Jones if she takes the Zedbest loan?
You can take a sample of the exam here. Correct answers are provided.
--Written by Hal M. Bundrick for MainStreet