FINRA Study Reveals Millennials Lack in Financial Capabilities
Americans born between 1978 and 1994 - commonly referred to as Millennials - came of age in an America that is different than it was for previous generations. Millennials grew up in a country characterized by more racial diversity, a narrower gender gap in educational attainment, large increases in the cost of higher education, and the defining events of September 11, 2001.
In addition, millennials faced the Great Recession early in their lives and/or careers. In its wake, they continue to wrestle with the financial challenges of a struggling post-recession economy. Making up nearly a third of the population, Millennials are a significant force in the U.S. economy.
Given the financial challenges they face, the ability to make well-informed and effective financial choices is important for millennials. A FINRA Investor Education Foundation’s National Financial Capability Study (NFCS) suggests, however, that younger Americans lack the financial knowledge to make well-informed decisions, and that they engage in behaviors that are detrimental to their financial health.
As an example of how Millennials generally fall behind in this area, they are the most likely generation to have unpaid medical bills and who spend more than their income. They are unlikely to plan ahead with savings (not entirely unexpected, given their youth) with less than one-third having a rainy day fund, and only about 4 in 10 are saving for retirement, which is significantly lower than all other generations.
The remedy for these financial behaviors is quite simple:
If one were to only set aside 10% of all income into an account of some description, this would add up over time and would minimally provide a safety net if it were ever needed. It could also provide the seed money for a more involved investment strategy, like a retirement account, life insurance, etc.
Generally speaking, no one has heard a compelling argument for increasing one’s debt. We all would like to be debt-free, and the way to do that is to pay your credit cards and other debt down, one at a time, while maintaining lowest possible interest rates and contributing more than the minimum on the bill every month.
“Wall Street” is not some fantastical creature that is too difficult to understand unless you have a degree in economics. With sound advice, and a sensible middle ground investing strategy, it can actually be quite a relatively simple and easy to follow process.
4. Financial Literacy
Getting a basic education on the ways of money is not difficult nowadays. There are many state and national programs which focus on financial literacy. Or if you’re a do-it-yourself kind of person, there are many available programs online. Investing in your own financial well-being will pay off in dividends, as your increased understanding of the subject will result in better decisions being made, and greater control and responsibility over your financial behaviors.
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