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Financial education critical to reducing socioeconomic disadvantage
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Financial education critical to reducing socioeconomic disadvantage

Comment 4 minute read

ACER Deputy CEO (Research) Dr Sue Thomson warns growing income and wealth inequality will mean that socioeconomically disadvantaged groups will need strong levels of financial literacy to avoid being left further behind.

In an article published in Teacher, Dr Thomson said the impact of the COVID-19 pandemic on national economies has underlined the necessity for strong personal financial literacy.

‘With people suddenly able to draw money from their superannuation or freeze their mortgage repayments in order to meet expenses, it is vital that they have the skills to evaluate the costs and benefits associated with such options,’ Dr Thomson writes.

Drawing on data from the 2018 PISA Financial Literacy survey, which measures young people’s readiness to make responsible financial decisions once they leave school and enter further education or employment, Dr Thomson suggests that financial education has a role in reducing socioeconomic disadvantage.

The ACER report PISA 2018: Financial Literacy in Australia, co-authored by Dr Thomson, revealed socioeconomic background was a strong predictor of performance in financial literacy in all countries. In Australia, the average achievement of students from advantaged backgrounds was the equivalent of about three years of schooling higher than that of students from disadvantaged backgrounds.

Further, more than a quarter (26 per cent) of disadvantaged students were low performers, failing to reach the baseline level of proficiency in financial literacy, compared to just seven per cent of advantaged students. According to Dr Thomson, these students can typically make simple decisions on everyday spending, such as recognising value by comparing prices per unit, but lack any ability to look ahead and plan for the future.

PISA also revealed that disadvantaged students expressed lower confidence in dealing with certain money matters. Three-quarters of advantaged students felt confident or very confident about planning their spending with consideration of their current financial situation compared to 58 per cent of disadvantaged students, while 82 per cent of advantaged students felt confident about keeping track of their account balance, compared to 70 per cent of disadvantaged students.

Critically, Dr Thomson notes that disadvantaged students reported lower exposure to financial education than did advantaged students.

‘Providing young people with financial education is essential to help bridge disparities in financial literacy due to differences in students’ current socioeconomic status, and will potentially reduce differences in their future socioeconomic status,’ Dr Thomson writes. ■

Read the full article:
‘Equity issues in student financial literacy’, written by Sue Thomson and published in Teacher magazine, is available at

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