Some say the younger generations don’t have a firm handle on financial education. How do we address it? That’s a worth-while question, and one with no clear cut answer.
Many millennials grew up in the midst of a financial crisis that hit in ways not seen with previous crises. In an ever-more credit driven market, underemployment and tight credit limit the generation’s options, and yet a majority struggle with even basic forms of financial literacy, such as budgeting. So is there anything that can be done to keep this generation from becoming a lost generation?
Confidence vs. Capability
With a Filene Research Institute study finding that 70% of the millennial generation rates themselves as having high financial knowledge, but only 24% demonstrating what would be considered average understanding of the subject, there’s a clear gap between Gen Y’s perception of their capabilities, and their actual ability to care for themselves. According to a Time report, 61% of 25 to 34 year-olds require family money to make ends meet, and 45% use a credit card for necessities.
Habits such as those generally leave saving for future expense, such as retirement, out of the question. But how do you reach a group so thoroughly sure that they know what they need to know, even as their own practices prove them wrong?
In the simplest terms, we need to create resources that younger generations will actually use to ensure they better comprehend the financial challenges they will face. A surprising few educational institutions, from primary schools to universities, offer any sort of financial education option, and even fewer mandate it.
In fact, only Missouri, Tennessee, Utah, and Virginia require that high school students take a personal finance course to graduate. One option is to prompt greater mandates for this sort of education.
The US Consumer Financial Protection Bureau recommends all states introduce curricula that include introducing key financial concepts as early as kindergarten, requiring a stand-alone personal finance course for graduation from high school, including personal finances on standardized tests, providing hands-on learning opportunities for money management, offering teacher incentives and training to lead such classes, and providing parents with tools to discuss money topics at home.
There has also been a greater push toward technology for better understanding of money management amongst the younger generations.
Multiple financial professionals recommend finding ways to integrate subtle financial education into gamming, while others are taking the more straight-forward approach of creating mobile applications that allow users to frequently interact with their finances, as well as keep track of multiple sources at once, including mobile or virtual wallets and credit cards alongside bank accounts.
Younger entrepreneurs looking to educate their own generation have even taken it upon themselves to start social media campaigns and online video series, hoping to reach their peers where they know they spend the most time.
Time and Experience
Something to remember with this generation is that they’re just starting to come into their own.
It’s natural that a generation whose populous is only now becoming old enough to be able to reasonably buy a home would not know as much about mortgages and the cost of ownership as generations prior.
Growing up in a time when inflation was largely controlled also means that they don’t have the same practical experience with the concept. When it comes to millennials’ financial education, the focus needs to be on the basics – on financial planning and decision-making that will allow them to better plan for their own futures. Only when they have a solid grasp of those concepts will larger-picture financial matters start to be of genuine interest.
Ken is a finance expert with a degree in finance. He loves pizza, especially Chicago deep-dish from Lou Malnati's!