More debt and decision-making demands combined with lower financial literacy levels are making it especially difficult for Millennials to get ahold money management issues.
Millennials and Money: The State of Their Financial Management and How Workplaces Can Help Them found that Millennial difficulties with student debt and money management decision-making are greater compared to those in the same age range (18-37) a decade ago. At the same time, their financial literacy levels are lower, according to the TIAA Institute and the George Washington University’s Global Financial Literacy Excellence Center (GFLEC).
“As one of the largest and most highly educated generations, Millennials play an increasingly pivotal role in our economy,” Stephanie Bell-Rose, Head of the TIAA Institute, said in a statement. “The results of this study are a wakeup call to employers, financial institutions, and anyone else who is concerned about improving economic outcomes and supporting the younger workforce through financial education.”
“Millennials’ precarious financial situations combined with their low level of financial literacy can put their financial wellbeing at risk,” added Annamaria Lusardi, the Academic Director of GFLEC. “This is why employer-sponsored financial education becomes critical in helping them secure a financially secure future. The more these programs are tailored to specific individual needs and financial situations, the more effective they will be.”
Only 19 percent of Millennials who perceived themselves as having high knowledge about personal finance were able to correctly answer basic questions assessing fundamental financial concepts.
Key findings
- The proportion of young adults with outstanding student loan debt has increased from 34 percent in 2012 to 43 percent in 2018.
- Over 50 percent of Millennials are concerned that they may not be able to pay off their student debt.
- The proportion of young adults accruing high credit card fees increased from 54 percent in 2009 to 60 percent in 2018.
- Millennials are financially fragile; 37 percent report they would not be able to come up with $2,000 in 30 days.
- The majority (68 percent) of Millennials report feeling anxious or stressed about their personal finances.
Forty percent of Millennials have been offered financial education by a school, college, or employer. Of those offered such programs, 68 percent chose to participate, with 31 percent accessing these programs through an employer.
To improve the financial literacy and financial wellbeing of this demographic, the report recommends that employers consider the following tactics:
- Start with a financial check-up to assess employees’ current financial wellness. Each individual has specific financial needs and circumstances. This can reveal where an employee is struggling or lacks financial knowledge.
- Focus on an integrated and individual approach that helps employees manage both assets and debt, as well as build short- and long-term savings.
- Make workplace programs personalized and simple. Research shows that simple language and a step-by-step action plan is critically important to improve engagement and affect behavioral change.