U.S. Teens Don’t Know Jack About Finances

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When it comes to money, American teens have a lot to learn.

That was a finding of a recent financial literacy test administered by the Paris-based Organisation for Economic Cooperation and Development. It was the first test of its kind, assessing teens’ knowledge of personal finances – including banking, taxes and how interest rates work – and their ability to apply those skills to financial problems.

Of the 18 countries tested, the U.S. ranked ninth, sandwiched between Latvia and the Russian Federation. Chinese students in Shanghai (the only Chinese city tested) earned top scores. Belgium, Estonia, Australia and New Zealand also ranked near the top. Colombia, Italy and the Slovak Republic rounded out the bottom three performers.

In a press release, the OECD said the overall results of the 29,000 15-year-old students it tested were less than impressive.

“Around 1 in 7 students … are unable to make even simple decisions about everyday spending, and only 1 in 10 can solve complex financial tasks,” OECD said.

One seemingly simple question from the test required that teens know how to read a pay slip and understand the difference between gross and net pay.

According to CNN Money:

Nearly 20 percent of U.S. students didn’t even reach the baseline level of proficiency, “or the basic skills that are needed for success later in life,” according to Michael Davidson, head of early childhood education at the OECD.

The Associated Press said just 19 states in the U.S. require a personal finance course in high school.

The OECD defined financial literacy as an essential life skill for teens. The test results indicate that the U.S. has a lot of work to do when it comes to educating its kids on financial matters. CNN Money said:

“If we want to have young people who are globally competitive in 20 years, having a good solid basis of understanding their financial lives early is important,” said Ted Beck, president of the nonprofit National Endowment for Financial Education. “This should be a national priority.”

How well would you score on the test? Find out here.

When I was a senior in high school, I had a free period open, so my mom encouraged me to take our school’s “Prep for Life” class. Financial literacy was one of the focuses of the class. We learned how to write a check, balance a checking account and make a monthly budget (for rent, food, entertainment, gas, utilities, etc.). That was it, but I guess it’s more than some students get.

Were you surprised to see where American teens rank when it comes to financial matters? Share your thoughts below or on our Facebook page.

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  • ballen1133

    The United States of America–the land of stupidity. When I was in high school way back in ’69 or so part of our home economics course was finance. I learned about bank accounts, balancing check books, loan interest and insurance. But those courses were thrown out to make room for what the educators with their heads up their arses considered oh so important to the education of the child but really is just fluff. Do they even try to teach civics or contemporary world problems anymore?

    • eyeRollz

      Just wondering, what are you referring to as fluff classes?

  • KaraLynn

    She asks “Are you surprised?”. Absolutely not. I agree that a lack of school courses built around personal finance are PARTIALLY to blame. Between the schools not teaching PF and parents not teaching PF, no, it does not surprise me that many teens have no clue about how to manage their finances.

  • m3libra

    I’m truly appalled by the sample test questions and answers. For example, sample #5 asks for reasons why it’s better for a woman to pay off a $7,400 loan balance @ 15% with a new $10,000 loan @ 13%. The answer they’re looking for is that “she will be paying lower interest.” Since when is $1,300 less than $1,110?

    By the way, in the real world this is called a “cash-out refinance” and look at how well those worked out for us Americans.

  • eyeRollz

    I’m not surprised, they didn’t teach us anything about finances in high school and unfortunately my parents were the type that thought kids didn’t need to be bothered/worried about household finances.

  • Y2KJillian

    The only way the re-fi would be advantageous is if she turned around and used the extra $2600 to immediately pay down the new loan…then at 13% if would be better. BUT she’d have to check if there were an early pay-off penalty clause — or other fees to do this — there often are. And she would have to READ the paperwork; the assurances of the loan officers can be meaningless!

  • speaksthetruth

    I did 100%. #feelingproud