They may be navigating their way through a high tech world with ease, but today’s young people don’t have the skills to make basic financial decisions. At the same time, they’re coping with increasingly complex money matters: student loans, credit and debit cards, 401(k) and cafeteria plans.
Researchers at the University of Michigan Retirement Research Center looked at financial literacy among young people and found that fewer than one-third have basic knowledge of interest rates, inflation and risk diversification.
- The average loan debt for college graduates rose six percent between 2006 and 2007.
- The median credit card debt among college students rose by 74% between 2004 and 2009.
- The fastest-growing group of bankruptcy filers is those age 25 and younger.
It’s a staggering debt load that’s influencing major labor decisions, say the researchers.
Financial literacy is strongly influenced by family background the researchers found, and it can easily be passed on from parents to children. That’s where Parents as Teachers comes in, helping young parents create and manage a spending plan, decipher paycheck stubs and balance checkbooks…all with the help of Money Matters, a young parent’s workbook for finances and the future.
Do you think you’re smarter than the 20-somethings in this study?
*Questions used in Financial Literacy among the Young survey by Annamaria Lusardi, Olivia S. Mitchell and Vilsa Curto