In the wake of the second round of OECD PISA student financial literacy results, Paul Gerrans, Professor of Accounting and Finance at the University of Western Australia, looks at whether more needs to done to ensure the financial literacy of Australian undergraduates.
The recent OECD PISA financial literacy results indicated that while Australian 15-year olds scored above the average of other OECD countries, scores were lower in 2015 than 2012. Hence, as the Deputy Chair of the Australian Securities and Investments Commission noted, “there is still work to be done”. While financial literacy is incorporated into the Australian Curriculum, for example in Maths for grades one to ten, education is more directly a state responsibility and schools have some degree of autonomy, meaning that student exposure to financial literacy is rather uneven. There therefore remains a need for financial literacy education at other levels, including university.
A criticism that has been levelled at financial education courses is that they likely preach to the converted, though there is no evidence provided to support the criticism. Two new reports funded by Financial Literacy Australia do provide evidence to evaluate the claim. The first report (Longer-Term Impacts of University Level Undergraduate Financial Literacy Education) examined a cohort of more than 300 students who chose an elective financial literacy unit targeted to students enrolled in non-Commerce degrees.
The report presents a comparison of the characteristics of those who chose the unit, with those of a sample of their peers who did not enrol. The unit was a full-semester, face-to-face, lecture and tutorial delivered in 2013. The study assessed students’ objective and subjective financial literacy before enrolling in the course using standard questions. Those enrolling had marginally lower objective financial literacy scores than their peers, though the difference is not significant. However, in terms of subjective assessments (e.g. satisfaction in managing finances and financial decision making ability) those who enrolled had significantly lower scores than their peers. That is, those enrolling did not appear to be the “converted,” rather, they have a desire to improve their financial literacy.
The second report (Evaluation of an Online and Face-to-Face University Level Personal Finance Delivery) compared outcomes from two different units in personal finance delivered through different channels. One unit at the University of Western Australia (UWA) relies on face-to-face delivery, whereas the second unit is delivered online at the Macquarie University. The units are comparable. At the UWA, students enrolled in the elective financial unit were no different from their non-enrolled peers in terms of objective measures of financial literacy. However, in terms of self-assessments, those enrolled were less confident than the control group, with significantly lower assessments of their financial decision making ability and satisfaction managing their finances. At the Macquarie University, those enrolling in the online unit had higher scores on some, but not all, of the objective measures, even allowing for their predominantly Commerce-based majors. In terms of magnitude, the differences were less than half a question on a four-point scale, and less than one question on a 13-point scale. In terms of the subjective assessments, those enrolling were again less confident than their peers, though the difference was not robustly significant.
In terms of assessing the claim of “preaching to the converted” the two large cohorts of students enrolling in the face-to-face unit refute it, whereas the online-cohort provides no robust support either.
These studies present valuable evidence but larger samples are needed to better establish significance as well as to conduct deeper analysis of the characteristics of the students who take financial literacy courses. However, evidence so far suggests that students who enrol in financial literacy courses may have a real need for them.