From the USA Today article “The cost of financial illiteracy“:
Studies show that a majority of young people in the United States have poor financial literacy, a trend that has been consistent over the past decade and shows few signs of improving. This at a time when young adults face a difficult job market and more personal debt, and yet must take greater responsibility for their financial future.
Today’s twentysomethings hold an average debt of about $45,000, which includes everything from cars to credit cards to student loans to mortgages, according to a PNC financial independence survey released last month.
How bad is the problem? The Treasury Department and Department of Education have teamed the past three years to assess financial literacy in U.S. high schools, and the results haven’t been pretty: the average score of almost 76,900 students in 2010 was 70%. Last year’s testing of about 84,000 students and this year’s of about 80,000 students were both a point lower: 69%.
The problem has been a long time coming. A biennial survey by Jumpstart Coalition for Personal Financial Literacy, conducted from 1997 to 2008 (when many Millennials were in high school) showed high school seniors doing even worse. In 1997, the average score on a 31-question financial literacy exam given as part of the survey was 57.3%. In 2008, the average score was at its lowest ever, 48.3%.
Though young people in America have for decades struggled with financial literacy, state curricula haven’t shifted much to address the gaps. Fewer than half of states make high school students take an economics class, and just 13 require a personal finance class, according to a 2011 survey by the Council for Economic Education. In those 13 states, though, the payoff is clear: Students who had taken such courses were more likely to go on to save money and pay off a credit card bill in full each month, and less likely to be compulsive buyers, max out credit cards and make late payments.
The biennial survey also shows that just 16 states require testing in economics, three fewer than in 2009. This regression is noted in the survey summary, which points out that over the past two years, the trend toward teaching on these subjects has slowed, and is “in some cases moving backwards.”
To ensure that rising generations have the tools to be financially successful, financial literacy experts and advocates interviewed by USA TODAY say that education must start in the early years.
Whether they’re learning about managing money, or not, at home or in school, the lack of financial savvy among Millennials could have a trickle-down effect with detrimental consequences for society, experts say.
Young adults with too much credit card debt can be precluded from certain jobs, and poor financial decisions can force some to drop out of school, says Ted Beck, CEO of the National Endowment for Financial Education. And if the next generation is unable to “continually acquire skills,” he says, the United States is left with an uncompetitive and unattractive workforce that by necessity will lean more on social programs.
Beck says today’s young adults are “a test-case generation of what’s to come. They’ll be responsible for their financial lives to a much higher degree than previous generations. We have to figure out how to improve their knowledge base so they don’t dig a hole.”