I ran across this research and felt it was worth sharing. Apparently, and not surprising to me (from my own personal experience,) millennials are pretty terrible within the realm of personal finance; I, myself, was oblivious until a year-and-a-half ago, at the age of twenty-seven. While there are those of us out there who have been getting it right all along, by and large, that is just not the norm.
George Washington University, supported by PricewaterhouseCoopers (PwC,) compiled data from the 2012 National Financial Capability Study, analyzing over 5,500 responses from people ranging in age from 23-35, in order to gain understanding of decisions that are threatening Millennials financial security. What they found was that, on average, millennials don’t know much about finance to begin with; in fact, only 24% of those surveyed had “basic financial knowledge.” On a positive note, “8% demonstrated high financial literacy.”
Additionally, 34% of millennials are unhappy with their current financial situation, over 54% are concerned about their ability to repay student loans, 30% overdraw their checking accounts, and 42% utilize what are known as “Alternative Financial Services” (e.g. payday advances, title loans, and rent-to-own services.) Furthermore, of those who actually have some retirement savings (only 36% of us!), 20% have taken loans from their accounts in the past year. 53% carry credit card balances from month-to-month and half of us couldn’t even come up with $2,000 for an emergency.
Part of the report’s conclusion reads: “Millennials’ financial practices are of concern because of the potential for these behaviors to become firmly established. Indeed, the research has documented that the gap between the amount of financial responsibility given to young Americans and their demonstrated ability to manage financial decisions is rapidly widening. Furthermore, their knowledge deficit could prove disastrous for them, the economy, and society.” – underlined emphasis added by me.
Some additional information on the subject: according to Survey of the States, only 17 states currently require a high school level course in personal finance and 20 require a course in economics. Standardized testing in economics is only required in 16 states, a drop from 27 since 2002. Is it just me, or does the timing of these changes occurring since the passage of No Child Left Behind (NCLB) seem a bit coincidental? By 2010, nearly 40% of schools were lagging behind in the requirements of the law, leading the Obama administration to issue waivers in exchange for implementation of Common Core, aimed at “preparing students for higher education and the workforce” (edweek.org.)
Here’s my point…how does a program aimed at improving the education of our nation’s children (myself included) result in a decrease in curriculum that would do that very thing? With the required standards, schools inability to reach them, and consequences associated with not reaching them, schools were essentially forced to “teach the test,” thereby spending less time on subjects not found on the standardized tests themselves.
So how do we solve the problem? EDUCATION! Obviously, we can’t solely rely on the school system to teach us and our children about personal financial matters. That responsibility, as it should in my opinion, falls on our shoulders as parents. According to additional information from Survey of the States, 72% of parents are reluctant to talk to their kids about family financial matters. We must break this cycle, educate ourselves and our loved ones, and without a doubt, talk to our children about money and how to utilize it responsibly so that they may grow up and make sound financial decisions. We must get ourselves on the right track and raise our children with a solid foundation that will help them to not make the same mistakes that we have made.
As you are sending your children and their young minds out to school this morning, I ask you this:
- If you are a parent with school-age children, how do you feel your child’s or children’s school system is fairing in their education, both as a whole and on topics such as these (i.e. personal finance)?
- Are you homeschooling? Why have you chosen to do so?
- Are you educating your children at home about personal finance in conjunction with state schooling?
What are your thoughts? Happy Monday!