Risky business

by Tracey Burns
Project Leader and Senior Analyst, OECD Directorate for Education and Skills

As our world becomes increasingly interconnected, so do the risks we face. A disease breaking out in a village in Africa, a bank crashing on Wall Street or a protest in a distant country can all potentially “snowball” and influence the world financial, health or security order.

While very different topics, environmental degradation, financial crises, cyber-attacks and social instability both within and in between countries have all been identified as risks for OECD countries and indeed, the whole world. Their global nature means that all of these risks require a co-ordinated international response. Education has a key role to play: as a preventative tool, it can be used to raise awareness as well as shape the attitudes and responsible behaviours of a generation of conscious global citizens. Education can also mitigate the effects of risks by equipping students with the knowledge and skills needed to cope with crises as they emerge, building their resilience in the process.

A newly released Trends Shaping Education Spotlight explores some of the ways education can make a difference:

• Education can prepare the future workforce with the skills required to address emerging risks. Whether it is in the fields of green energy, sustainable food production or clean water technology, there is a call for stronger STEM skills for students and more training in these innovative fields as one of the best ways to respond to environmental risk. Similarly, technological risks such as cyber-attacks and cyber-espionage have created a huge demand for cyber security professionals and even "ethical hackers" as a way to improve cyber safety. These emerging fields of work will be built on new frontiers of research and innovation, and all will require new skills and competencies.

• Education can be a catalyst for changing knowledge, attitude and behaviour. For example, better educated people are more likely to be concerned about the environment and to promote political decisions that protect it. "Green schools” can be used to model what sustainability means in a daily context as they are designed to minimise energy, water, and waste. Environmental issues can be integrated across the curriculum and are a powerful tool for raising awareness.

• Education can reduce the impact of risk and crises. While not the main cause of the latest global financial crisis, a lack of financial literacy might have deepened its effects: Less financially literate individuals are more likely to have costly mortgages and engage in credit card spending, and less likely to hold precautionary savings and undertake retirement planning. The latest PISA results reveal that 22% of students do not have basic financial skills across OECD countries. Financial education can foster greater understanding of financial processes, products and services and might be a key to preventing future shocks from extending and worsening.

• Education can protect and prevent young people from engaging in risky behaviour. Cyber “hygiene” education seeks to provide youth with the tools to better handle technological risks such as fraud, identity theft, online predators and cyberbullying. It is an increasing part of the curriculum in countries such as the Netherlands, the UK or Japan. Similarly, both formal and informal education can help counter the risks of radicalisation and extremism, two very current concerns for countries across the OECD. By supporting social cohesion, fostering intercultural understanding and dialogue, and developing social and emotional skills, education can help protect youth at risk from recruiters who seek to attract them to their cause.

In our fast-paced modern world, it might be a comfort to know that some things remain the same. Basic literacy and numeracy are still important, for participation in society and as the basis for critical thinking and problem solving. These skills in turn allow us to better manage change and uncertainty. Perhaps one of the most important roles that education can play is to foster the capacity to deal flexibly with change and manage unanticipated and interconnected crises. Managing volatile situations well lessens the chance of global contagion of risk.

We can't entirely prevent the next outbreak of a communicable disease, a cyber-attack or another bank crashing. But we can continue to equip our citizens with the tools they need to protect themselves, and we can continue to support innovative solutions to minimise these risks. Any challenge is also an opportunity. The biggest contribution education can make it is to help develop the capacity and skills to build a safer future for all.

Links
Trends Shaping Education Spotlight No. 10: Globalisation of Risk
Trends Shaping Education 2016
PISA Financial Literacy
Center for Educational Research and Innovation (CERI)

Join our OECD Teacher Community on Edmodo

Photo credit: Crisis Economic Environmental Finance Global Concept @shutterstock 

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Dollars and sense? Financial literacy among 15-year-olds

by Andreas Schleicher 
Director of the Directorate for Education and Skills, OECD
Pierre Poret
Director of the Directorate for Financial and Enterprise Affairs, OECD

Two in three 15-year-old students earn money from work activity, and more than one in two hold a bank account. And yet, among students in OECD countries who took the 2015 PISA test in financial literacy, fewer than one in three of them reached Level 4 on the assessment – the level that signals the kinds of knowledge and skills that are essential for managing a bank account or a financial task of similar complexity. And the demands on their financial skills rise as students get older: 79% of Australian students took out a public loan in 2013; in the Netherlands, students graduate with an average debt of USD18 000.

Being able to interpret financial documents and make financial decisions that take into account longer-term consequences, such as understanding the overall cost implications of a loan, are precisely the kinds of things that students are expected to do in the PISA test. More generally, the PISA assessment seeks to assess students’ knowledge and understanding of financial concepts and risks, and the skills, motivation and confidence to apply such knowledge and understanding in order to make sound decisions across a range of financial contexts.

Among the countries with data for 2012 and 2015, only students in Italy and Russia made any headway in their performance in financial literacy. This is worrying because it’s an uphill struggle. Everywhere, people face more challenging financial choices. The spread of digital financial services opens up new opportunities for people once excluded from the financial system; but the digitised system also exposes consumers to new security threats and risks of fraud that are compounded when low financial literacy is combined with poor digital skills and ignorance of cyber security.

There are also greater financial risks. More individualised pensions, and more uncertain economic and job prospects due to digitalisation, technological change and globalisation are just some of these. Last but not least, growing inequality means that those with poor skills face particular risks. We don’t expect 15-year-olds to be able to meet all of these challenges. But we should expect them to be able to define their priorities and plan what to spend money on; to remember that some purchases have ongoing costs; to be aware that they can become the victims of fraud; and to know what risk is and what insurance is meant for. Again, that is exactly what the PISA assessment of financial literacy is all about.

Parents and families play an important role. PISA results show that when students discuss money matters with their parents, they have significantly higher financial literacy skills, even after accounting for differences in socio-economic background. Young people can also learn on their own by using appropriately regulated financial products in a context where young consumers are adequately protected.

The trouble is that all this seems to work just for students from more privileged backgrounds. Advantaged students score the equivalent of more than one PISA proficiency level higher in financial literacy than their disadvantaged peers. That’s equivalent to the difference between being able only to identify a delivery cost that is stated on an invoice and interpreting the various elements of the same invoice to correct a mistake in the billing.

This shows how important it is for schools and school systems to play a role in giving all children a fair chance to succeed. Some school systems already do this very well. Students in the four Chinese provinces and municipalities that took part in the test – Beijing, Jiangsu, Guandongand Shanghai – came out well ahead of their peers in every other country. Even more impressive, the socially and economically most disadvantaged quarter of students in these provinces did as well as the second wealthiest quarter of students in the United States, and better than the wealthiest quarter of students in Brazil, Chile and Peru.

That raises the question of whether a great school system will automatically help its students to acquire strong financial skills. The answer is not straightforward. On the one hand, having a solid foundation in mathematics and reading is crucial for navigating the financial landscape, from computing percentages to reading a bank statement. On the other hand, the PISA financial literacy assessment reveals that 38% of the variation in financial literacy is not explained by mathematics and reading skills. Many features of financial literacy are unique to the subject. These include being aware that some deals really are too good to be true, understanding the role of income tax, being vigilant for fraudulent e-mails, and knowing one's rights and responsibilities in the financial marketplace. It is also interesting to see that some countries do much better in financial literacy than they do in reading and mathematics. This is the case in the Flemish Community of Belgium, the Canadian provinces that took part in the test, in the four provinces in China and in Russia, where students do better in financial literacy than predicted by mathematics or reading.

Educators should not see this as a zero-sum game, where more financial education will take something away from the rigour, focus and coherence that is needed to give students strong foundations in mathematics or reading. Instead, they should look for complementarities, where financial education becomes a context that helps make learning in traditional school disciplines more relevant and interesting. We already find good examples of this in Australia, Belgium, Canada, Lithuania, Peru, the Slovak Republic and the United States.

Evidence that there is a positive relationship between performance in financial literacy and holding a bank account or receiving gifts of money, all other things being equal, suggests that some kind of experience with money or financial products can provide students with an opportunity to reinforce financial literacy, or that students who are more financially literate are more motivated to use financial products, and perhaps more confident in doing so. Young people can also learn through after-school initiatives. In some countries, governments and not-for-profits are offering young people videos, competitions, interactive tools and serious games via digital and/or traditional platforms.

But the more financial education initiatives are developed, both in and outside of school, the more important it is for governments and other stakeholders to evaluate and prioritise such initiatives and to scale and spread good practice. PISA tells countries how well they are succeeding; the OECD International Network on Financial Education will continue to build and share relevant international expertise and help countries provide the right combination of financial literacy and consumer protection.

Links

PISA 2015 Results (Volume IV): Financial Literacy
PISA in Focus No. 72: What do 15-year-olds really know about money?
Programme for International Student Assessment (PISA)

Register for a public webinar on Wednesday, 24 May, 1:00pm Europe Summer Time (Paris, GMT +02:00) with Andreas Schleicher, Director of the OECD Education and Skills Directorate.

Follow the conversation on twitter: #OECDPISA

Join our OECD Teacher Community on Edmodo

Photo credit @shutterstock

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