How’s This for Teen Financial Education? Get a Job

By Kevin Mercadante

June 12, 2017

Best financial education may be a job

Are we coddling our kids too much?

You could draw that conclusion from a little-noted finding in the 2015 study on student financial literacy from the OECD-sponsored Programme for International Student Assessment, or PISA. Among 15-year-olds around the world, there may be a correlation between financial know-how and their participation in the workforce.

The chief finding, which Right About Money reported, was that teens everywhere know very little about personal finance; and that students in the U.S. rank in the middle of the pack and have not shown any progress in the rate at which they understand.

But the study also found that teen financial literacy tends to be higher in countries where teens are more likely to be employed in some capacity. For example, students in the U.S. had a mean financial literacy score of 487 with 55.6% holding a job—defined as “students who receive money for any work activity outside of school hours.”

Financial literacy rates are higher in countries with a higher labor participation rate among students. In China, where 73.9% of students hold a job, students have a mean financial literacy score of 566. In Belgium, where 82.8% of students work, they have a mean financial literacy score of 541. In Australia, where 59% of students work, they post a 509 financial literacy score.

In countries with low student labor participation rates financial literacy scores are low. For example, Spain clocks in with a 55.2% labor rate and a financial literacy reading of 469—both just below readings in the U.S. The situation is similar in Italy, where teen labor participation is 53.1% and the mean financial literacy score is 483.

This makes a lot of sense. A teen that holds a job learns how to work in a business environment, earn money, value money, manage it, and possibly even how to save and invest. Such real-world experience appears to boost financial confidence and capability.

The PISA data are not conclusive, as outliers like Canada and The Netherlands buck the trend. In Canada, which has a similar student labor participation rate (55.7%) as the U.S., the mean financial literacy scores was much higher, at 533. In The Netherlands, which has a heady teen labor participation rate of 82.2%, second only to Belgium, the mean financial literacy score is curiously low at 509.

Some of this may be explained culturally. Canada is among the global leaders in pushing for financial education in schools while the Dutch have a tradition of community involvement.

Another complication in the study is that the labor participation rate of 55.6% for U.S. teens in the PISA study is considerably higher than official statistics. The Bureau of Labor Statistics puts the percentage of teens holding jobs at around 34%–but confirms that this rate has fallen by 40% the last 40 years.

In other words, parents appear to be coddling their teens at historically high levels—and their teens may be paying the price.

More on kids and money:

The Value of Chores

Here’s a Second Chance Teachable Moment

Japan’s Leap of Faith with Financial Education

Rising Rates? Don’t Miss This Teachable Money Moment

Posted in International on June, 2017