When it comes to real life problems, adults usually start reminiscing about their school days with a bit of bitterness. Sometimes, they blame teachers that had failed at teaching, and on other occasions they blame themselves for not paying more attention. The skills that are missing the most often are usually those related to Economics and Financial literacy.
The news is full of reports on economy in decline and growing unemployment, while, at the same time, we plan family budgets, want to establish a business, or contemplate about whether to pay rent or get a mortgage.
A lot has been written about the bad state of the Education system in Slovakia. Thus, it is not our intention to focus on emotional shortcomings in knowledge of students in this article. Let’s rather look at the data – the results of this year’s Economics Olympiad organized by INESS, with over 6,500 high school students involved.
We shall thus introduce 10 key findings concerning economic skills of the youth in Slovakia.
- Sometimes, we get deceived by our inclination towards pessimism and also by a sudden surge of negative information. Undoubtedly, economic problems are worth the notice, but we should not get carried away and fall for incorrect assumptions. In the Economics Olympiad, only 10 % of high school students correctly claimed that Slovakia belongs to 1/5 of the richest states in the world.
- High school students know their way around the so-called “hard” data. They remember years, numbers, names. Unfortunately, sometimes they even remember them in a wrong manner, or their knowledge is outdated. The most successful category of the Olympiad was “Methodology of Economics and Basic Concepts.” This has also been confirmed by a number of education experts who cite this as a weakness of our Education system – memorization of data is still a favourite one among teaching methods. The average success rate in this category was 88 %.
- Less than 50 % of high school students cannot determine the lowest interest rate of a loan. In “Financial literacy” category, students were supposed to determine the model situation, when they pay the least for a loan. The success rate in this category ranged between 12 – 48 %.
- Comparative advantages explain why it is beneficial to devote time even to those activities at which we are “only” relatively achieving the best results. Some runners could surely become good football players, but they have chosen to focus on what they are best at. This principle is very old and belongs to the basics of Economics. Its functioning was understood only by 18 % of students. On the other hand, the absolute advantage principle was understood by many students – 84 % answered correctly that countries should specialise in the production of those goods, which they are best at.
- The application of knowledge in real life proved to cause trouble to number of students. They know which countries pay by euro, but they don’t know which criteria the countries have to follow if they want to use euro, not to mention why these rules are important. Only 28 % of students know those rules.
- A driving licence is something that many young adults long for. However, duties related to car maintenance are not known to all of them. To illustrate, the deductible is a part of the compulsory car insurance in Slovakia. Only 14 % of high school students understand its principle.
- Inflation and deflation are other phenomena that many are able to describe theoretically, but only some understand how they affect our lives. As prices change, so do real wages and interest rates in banks. Only 27 % of high school students correctly determined that if you save at a current interest rate of 2 % per year and prices fall by 1 % over the same period, the real interest rate is 3%. By applying the opposite logic (rising prices and falling real interest rate), the success rate among students was much higher – reaching 74 %.
- Only 13 % of students understand that an import quota is advantageous only for the company that can get it and get to the market of the country first. Conversely, 62 % of students understand that restricting the import of vegetables (or other goods) means a lower supply and higher prices.
- The ability to invest and to increase the value of their savings is a weakness of adults, but also of high school students in Slovakia. Many are mistakenly convinced that if the mutual fund income has been growing for 3 consecutive years, it will continue to grow in the fourth year as well. Less than 14 % of high school students correctly stated that growth in recent years may not continue forever.
- People used to queue for a mortgage as if it was freshly baked pastry. When you decide to actually get a mortgage, you should understand how it works. When the repayment period is shortened, the monthly payment will increase. By answering correctly, 75 % of high school students realized this connection.
Investment, comparative advantages or data comprehension – these are all weaknesses of economic literacy, which are, thankfully, not irreversible. Even though the compulsory schooling takes 10 years in Slovakia and the majority usually spends even more time at school, the elementary economic skills are often omitted in the process.
Understandably, everyone is interested in something else, but just as we have learned how to count or to read, we should not turn a blind eye to the importance of budgetary rules. Not only will we benefit from it, but also the society will.
Because the thing is, that business inventions many times come to life thanks to the economic skills of their bearers.
If I Were Slovak Minister of Education