While Millennials have proven themselves an increasingly budget conscious group, e.g., employing smart phone apps to ensure they get the best prices for their purchases, they have also shown themselves to have poor financial literacy. This generation is heavily laden with debt, with young adults holding an average debt load of $45,000. So, having a strong understanding of money management may be more important than ever.
The U.S. Treasury Department and Department of Education recently assessed Millennials’ level of financial literacy, and they scored a D+. Fortunately for Millennials, there are a multitude of resources available to help them become educated. However, recent surveys conducted by Fidelity Investments and TIAA-CREF indicate Millennials turn primarily to their parents for advice. The TIAA-CREF survey found that 47% of its 1,000 participants identified their parents as having a major influence in financial counseling. While parental input can be useful, it’s not always sufficient.
Financial education starts as early as pre-kindergarten and is best implemented by parents and schools. Studies show that children who learn money management skills at a young age enjoy long-term benefits throughout adulthood. A 2011 survey by the Council for Economic Education showed that students who studied personal finance in school were more likely to avoid accruing credit card debt, to be less likely to become compulsive shoppers and more likely to save money.
Young adults with poor financial literacy and money management skills can have a negative effect on society as a whole. Individuals with too much debt, whether credit or student loans, can be prevented from making major life changes such as buying a home, getting married or having children. Additionally, job seekers with too much credit card debt may be precluded from obtaining certain types of employment. There are also psychological and emotional implications, which affect physical health.
There are many resources available to Millennials either to start their financial education or to enhance what they already know. The key is to know where to start and whom to trust. Young people would do well to reach out to a broad set of resources including 401(k) administrators, employers, and financial planning firms that understand the diverse needs of Millennials. (We designed much of the content of our website with this in mind.)
Test your financial literacy at http://www.forbes.com/sites/financialfinesse/2013/04/04/7-questions-to-test-your-financial-literacy/ Also see http://www.usfinancialcapability.org/quiz.php
Here is a useful list of resources: http://money.usnews.com/money/personal-finance/articles/2008/04/02/financial-literacy-resources-online