American Kids Are Really Bad at Handling Money

A new report shows U.S. teenagers falling behind peers in China — and raises concerns about their financial futures.

Score another one for Chinese teenagers, who leave U.S. kids in their dust when it comes to knowing how to handle money. That's the latest anxiety-producing statistic (for American parents, anyway) to emerge out of a newly released international study of the financial habits of roughly 29,000 teens from countries as far flung as Australia, China, Colombia, France, Israel, Russia, Spain, and the U.S.

The goal of this first-ever international study of financial literacy, conducted by the Organization for Economic Co-operation and Development, was to gauge the financial know-how of 15-year-olds worldwide. Many of the teenagers have reached or are nearing the end of their required schooling, and must now decide whether to pursue a job or university education.

The study aims to see if teens are prepared to make such decisions about their financial futures at a time when a middle-class lifestyle no longer seems guaranteed. "Shrinking welfare systems, shifting demographics, and the increased sophistication and expansion of financial services have all contributed to a greater awareness of the importance of ensuring that citizens and consumers of all ages are financially literate," write the study's authors.

The results? Many teens still fall woefully behind in understanding financial instruments, institutions, and the best basic ways to build wealth. Among the study's startling data points:

· Just one in 10 of the students surveyed could answer the toughest financial-literacy questions on the 2012 survey, such as the impact of income-tax brackets on people's finances.

· On average, teens from higher-socioeconomic backgrounds scored a full 41 points higher on the financial-literacy section than poorer kids. That holds true across countries, meaning that thousands of poor kids worldwide begin their financial lives with less knowledge and at a disadvantage.

· Similarly, huge gaps exist in teens who say they hold bank accounts — an easy, important way to accumulate savings. In Australia, Belgium, Estonia, France, New Zealand, and Slovenia, more than 70 percent of 15-year-old students reported that they has opened an account, whereas in Israel and Poland, fewer than 30 percent of students had.

· Back to that anxiety-producing stat for American parents for a brief moment. Teenagers in China scored the highest averages on the financial-literacy portion of the test, followed by kids in Belgium, Estonia, Australia, and New Zealand. American teens were firmly in the middle, ranked ninth on the financial-literacy section out of 18 OECD economies and countries. They can take small solace in the fact that Russian and Italian kids know even less about managing money than they do.

The study comes at a precarious moment for financial-literacy education, as countries across the globe (especially the U.S.) struggle to figure out the best way to impart financial wisdom to the next generation. Although the U.S. alone boasts roughly 800 different financial-literacy curricula, no academic, institutional, or personal-finance expert has yet uncovered the most effective method for teaching these key money skills. In many ways, it's an unfair battle against the prowess of the financial-services industry that annually spends about $54 per person on financial marketing versus the roughly $2 per person spent in the U.S. on financial education.