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Thursday, July 10, 2014

How's your financial literacy? Young Australians aren't bad

What’s better value for money: loose tomatoes at $2.75 per kilo or boxed tomatoes at $22 for a ten kilo box?

A surprising one in ten Australian 15 year olds can’t answer that question or give vague or incorrect answers such as “bulk buying is better” or “you get more for less”.

The Organisation for Economic Co-operation and Development classifies those students as merely being able to differentiate needs from wants and perform single basic calculations.

But its first ever global survey of financial literacy finds Australian students better off than most. In the United States 17 per cent of students would have failed the question, in France 18 per cent, and in Israel 22 per cent.

It isn’t because Australians are especially good at classroom learning. The OECD says Australian students perform “better than might be expected” based given their performance in maths and reading. And nor is it because a lot of school time is devoted to financial literacy. Eight out of ten Australian 15 year olds get fewer than five hours of special financial tuition per year.

Just as important is what happens outside of school... The OECD says the number of books and cultural possessions in a students home is the most important socioeconomic predictor of financial literacy. As is banking. Eight out of ten Australian 15 year olds hold a bank account, putting Australia behind only Slovenia, New Zealand and Estonia among the 18 countries the OECD surveyed.

Australia comes forth out of the 18 overall, behind only Shanghai, the Flemish region of Belgium and Estonia. With an average score of 526 Australia is well behind Shanghai with 603 points but well above Israel and Italy with 476 and 466. Australia is comfortably ahead of the United States on 492 points.

The most difficult question in the two hour test required students to compare repayments and repayment speeds on two loans, each for different amounts with different interest rates. Around 30 per cent of the Australian students got the correct answers, compared to only 19.5 per cent in the United States and 9 per cent in Italy. In Shanghai 63 per cent of students knew the correct answers.

Test yourself: Are you game?

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