“We’re not going to improve our financial literacy rates until we start doing better at math” —
Arne Duncan, US Secretary of Education (2014)
This was the US Secretary of Education said after the OECD published its Programme for International Student Assessment (PISA) test that found almost 1 in 5 US students did not meet their financial literacy proficiency standards.
The PISA test, which serves as an international benchmark for student performance, found that of 48 000 students that participated in the assessment, one in four 15-year-olds are unable to make even simple decisions on everyday spending and one in ten can understand more complex issues, such as income tax
Shanghai-China, however, was placed at the top of the financial literacy table despite no formal financial literacy being taught in the curriculum.
“All the teaching and learning in Shanghai focuses on conceptual understanding” — Andreas Schleicher, director of education at OECD
The PISA report highlights that having a strong foundation in mathematics is one skill that can help young people navigate the complex financial environment.
So does this link between math and financial literacy exist?
What about the data?
A number of other studies have been done to track the link between basic mathematics and financial literacy.
- A study of Mexican students ages 15 and 18 finds that students who perform better in mathematics scores on the OECD tests also perform better in financial literacy scores. The results showed that for each mathematics question a student got correct, the financial literacy score rose by a corresponding 0.12 deviations
- British Cohort study of 17,000 individuals born in the UK in 1970 finds that maths scores captured by age 10 show a statistically significant correlation with net wealth at age 42.
- A Swedish study of 2000 adults found that high numeracy levels were the most significant predictor of strong financial literacy
- Study in India shows that low numeracy is associated with a 4.8% reduction in financial literacy, while a high level of numeracy is associated with a 5.6% increase
Given the strong association between math and financial literacy, the focus should be on the basics.
Mr. Ogden of the Financial Access Initiative who recommends that children get “good with numbers’ and that they should simply take more mathematics courses in order to improve their money management skills.
But what does “good with numbers” actually mean? The UK Money Advisory Council defines this as strong numeracy skills.
Not all math is created equal
Numeracy at a basic level is the ability to understand and work with numbers in the real world.
The UK Money Advisory Council notes that numeracy is not the same as having a formal math qualification and instead defines it as:
“Having the confidence and competence to use numbers and data in everyday life to make good decisions, including financial ones.”
Breaking this down, we have three focus areas: competence + confidence + real-world application.
How does PocketJam help develop numeracy skills?
We focus on developing the core skills relating to numeracy by helping kids practice their numeracy skills.
Our approach to developing numeracy is as follows:
- Competence — We only focus on core math principles (arithmetic, number & operation sense, computation, and basic statistics).
- Confidence — We set age-appropriate questions for children to solve. The difficulty of the questions adjusts based on the child’s ability.
- Real-world application — We provide world problems that are linked to real-world scenarios to ensure that knowledge is applied.
It is noted in some of the studies (OECD, British Cohort study) that reading also plays an important role in financial literacy — hence our focus on word problems.
We’re launching soon! If you are a parent and are interested in using PocketJam please visit our website www.pocketjam.io. We are also offering $10 to our first 100 parents who use PocketJam.
Start investing in your child’s financial education today.
Let’s get Jammin’!