Core competencies framework on financial literacy (Youth)

• Context
• The study
• Key findings
• Points to consider:

Context

Financial education is becoming increasingly recognised by the international policy agenda. Three sets of high-level principles relating to financial education and endorsed by the G20 leaders over the past few years reflect this. In 2013 G20 leaders called on the OECD and the International Network on Financial Education (INFE) to develop core competencies frameworks on financial literacy for both adults and young people.

The study

This 2015 report addresses the call from G20 leaders to develop a core competencies framework for financial literacy among young people. It is designed as a policy tool, highlighting a selection of financial literacy outcomes and providing guidance that may be of benefit to young people aged 15-18 across a range of economies. The report stresses that the guidance can be adapted to a range of countries and economies, taking into account cultural and economic differences both within and between populations. Obviously, some of the competencies may be more relevant than others, depending on the setting.

However, the framework is designed to be applicable regardless of the national education system or approach to skills development, while recognising that the competencies described in the report need to be supported by sufficient consumer protection and financial inclusion to optimise the benefit to young people. The stated main aims of the report are:

• Inform all stakeholders with an interest in financial education about expected financial literacy outcomes for young people
• Help policy makers identify core competencies
• Help clarify financial literacy issues among an increasing number of people
• Provide a benchmark for countries at different stages of financial development
• Facilitate a mapping exercise to identify potential gaps in current financial education provision
• Encourage discussion of best practice at the national and international level

The report recognises that young people have very different financial needs to older people. They are relatively inexperienced in choosing and using financial products and may only have recently started dealing with financial transactions. They are also highly likely to face very important financial decision in the near future, around living arrangements, education and employment.

The ‘core competencies’ referred to in the framework are aspects of knowledge, behaviours and attitudes that contribute towards people making rational financial decisions. There are four tables in the framework, covering the following areas (which are then further sub-divided into topics):

• Money and transactions
• Planning and managing
• Risk and reward
• Financial landscape

Core competencies for each content area and topic are grouped in the following way:

• Awareness, knowledge and understanding
• Confidence, motivation and attitudes
• Skills and behaviour

Key findings

This policy tool draws heavily on content from national financial education frameworks, and maps the findings to the content areas used in the PISA financial literacy assessment (an assessment of financial literacy developed by the OECD).

The report describes in detail competencies relating to each topic. While these are too detailed for this summary the detailed framework, with its areas and topics, are shown below in the order they appear in the report.

Money and transactions:

• Money; income
• Payments and purchases; prices
• Financial records and contracts
• Foreign currency

Planning and managing

• Budgeting, managing income and expenditure
• Saving
• Longer-term planning
• Credit

Risk and reward

• Changing value
• Identifying risks
• Financial safety nets and insurance
• Balancing risk and reward

Financial Landscape

• Regulation and consumer protection
• Education, information and advice
• Rights and responsibilities
• Financial service providers
• Scams and fraud
• Taxes and public spending, external influences

The framework focuses on developing high-level outcomes that can be used to develop or improve national strategies or other programmes specifically for young people, as well as creating substantive measures for use in evaluations of interventions.

Points to consider:

• Relevance: This report is relevant to all stakeholders and policymakers with an interest in financial education and financial literacy among young people, and particularly those looking to develop or influence frameworks, programmes and strategies in these areas.
• Generalisability/ transferability: The research is designed to be universal and applicable in all settings. However, there will obviously be some areas that are of less relevance to people in the UK.