This presentation by Annamaria Lusardi was made at the opening session of the 2nd OECD-GFLEC Global Research Symposium to Advance Financial Literacy on 6 November 2014, which addressed cutting-edge policy issues and research ideas to advance the global financial literacy agenda. Find out more at http://www.oecd.org/daf/fin/financial-education/oecd-infe-gflecsymposiumfinancialliteracy.htm
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LUSARDI Annamaria - 2014 Symposium to Advance Financial Literacy
1. 2nd Global Policy Research Symposium to Advance Financial Literacy
Annamaria Lusardi
Academic Director, Global Financial Literacy Excellence Center (GFLEC) Chair, PISA Financial Literacy Expert Group
TOWARDS A MORE INCLUSIVE SOCIETY
2. 2
2nd Policy Research Symposium to Advance Financial Literacy
•This is the second Policy Research Symposium
•Proceedings summarizing presentations in the first Symposium are available
•New theme
3. 3
Towards a more inclusive society
•The focus of this Symposium: Building a more inclusive society
•Research demonstrates that there are large differences in financial literacy
•Who are the vulnerable groups?
–women
–lower income/lower education
–immigrants, elderly
–young
4. 4
Financial knowledge among women
•Very robust findings of large gender differences in financial knowledge
•Women are much more likely to say “I do not know”
22%
35%
47%
33%
38%
55%
60%
51%
0%
10%
20%
30%
40%
50%
60%
70%
US
Netherlands
Germany
Canada
Financial knowledge by gender (% answering 3 Qs correctly)
Women
Men
50%
46%
43%
47%
34%
29%
30%
28%
0%
10%
20%
30%
40%
50%
60%
70%
US
Netherlands
Germany
Canada
At least one "don't know" answer, by gender
Women
Men
5. 5
Financial knowledge across income groups
•Financial knowledge is also strongly positively correlated to income level
14%
19%
25%
31%
38%
48%
56%
62%
0%
10%
20%
30%
40%
50%
60%
70%
<$15K
$15-25K
$25-35K
$35-50K
$50-75K
$75-100K
$100-150K
$150K+
Financial knowledge by income level in the United States (% answering 3 questions correctly)
6. 6
Financial knowledge across education groups
•Financial knowledge is strongly positively correlated to education level
10%
22%
38%
49%
65%
0%
10%
20%
30%
40%
50%
60%
70%
Less than HS
grad
High school
diploma
Some college
education
College
graduate
Post-Graduate
education
Financial knowledge by education in the United States
(% answering 3 questions correctly)
7. 7
Financial knowledge among the young
•Compared to other age groups, financial knowledge among the young is very low
•Now we have 2012 PISA data on financial literacy that allows us to study financial literacy among high school students in 18 different countries
13%
22%
28%
34%
38%
38%
42%
43%
50%
55%
54%
49%
0%
10%
20%
30%
40%
50%
60%
18-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75+
Financial knowledge by age in the United States (% answering 3 questions correctly)
8. 8
New data for 15-year-olds around the world
•We have important new data
•2012 Programme for International Student Assessment (PISA)
•Measuring financial literacy among high school students
9. 9
2012 PISA Financial Literacy Assessment
PISA is the first large-scale international study to assess the financial literacy of 15-year-old students
The PISA financial literacy assessment provided an articulated plan for developing items, designing the instrument, and providing a common language for discussion of financial literacy.
10. 10
PISA Financial Literacy Assessment
•A group of experts was convened by the OECD to design the 2012 module on financial literacy
•They represented many countries and many stakeholders (treasury departments, central banks, regulators, practitioners, academics)
•Experts worked on the assessment for about two years
•Data was released on July 9, 2014
A multiple-year project
11. 11
US release of PISA financial literacy data, July 9, 2014
12. 12
What does the data say?
•The data is incredibly rich and provides a lot of information that can be used by policy makers, practitioners, teachers, and parents
•The data tells us a lot
•Today we are also going to listen to some young people. They are the faces behind the numbers.
13. 13
Some important findings
•A lot of the variation in financial literacy is explained by socio-economic background (parent’s income and education)
•We start unequal when it comes to financial literacy and inequality will only grow
•How to provide equality of opportunity early in life?
14. 14
0
2
4
6
8
10
12
14
16
18
20
Estonia
Italy
Russian Federation
Croatia
Australia
Fl.Com. (Belgium)
Poland
Shanghai-China
Colombia
Latvia
Czech Republic
OECD average-13
Israel
Spain
France
Slovenia
United States
Slovak Republic
New Zealand
Financial literacy
Mathematics
Reading
Percentage of variation in performance
explained by socio-economic status
Relationship between socio-economic status and financial literacy, mathematics, and reading performance
15. 15
Why should we care?
•Financial knowledge can be linked to behavior: saving, borrowing, investing, and retirement planning
•Today, we will see that financial knowledge is also linked to wealth inequality
•The paper in the afternoon session shows that financial knowledge is one of the main determinants of wealth inequality
16. 16
The importance of research
• Assessing how financial knowledge impacts wealth inequality is a hard task
• Need a (new) model of saving that incorporates financial knowledge
•The model needs to incorporate realistic features of the economy, such as:
–Many sources of risk
–Borrowing constraints
–Inequality in wages
17. 17
The importance of research (continued)
Once we have such a model, it is possible to
• Calculate the share of wealth inequality that is due to financial knowledge
•Understand the behavior of financial knowledge over time
•Assess whether policies or programs improve well- being; for example, what are the effects of adding financial literacy programs in school?
18. 18
From research to applications
What can be done to address financial literacy among the young and to address inequality?
•We have received a large number of projects which have been done around the world
•We want to discuss other ideas as well
Borrow from other fields, for example health
19. 19
From research to applications (continued)
•Very important to share experiences
•INFE is a true gateway for financial education
•We are looking forward to an interactive session at the end of the Symposium
−Still time to ask questions or to mention projects
−Learning from each other
20. 20
Philadelphia
Los Angeles
Pasadena
Palo Alto
Berkeley
Hanover
Boston
Madison
Northampton
Paris
Montreal
Munich
Milan
Groningen
Amsterdam
Braga
Madrid
Stockholm
St. Gallen
Istanbul
Mexico City
Tianjin
Turin
Oxford
Glasgow
Sao Paulo
Vienna
Singapore
Wellington
Washington D.C.
GFLEC’s Global Network: Ongoing projects around the world