US Millennials Aren't Clued Up Enough About Finance - Government Survey

Tom Burroughes

13 March 2014

Coming shortly after a survey of US “millennials” (aged 18-34) showed they are cautious about money, a new survey shows this age group is dangerously ill informed about money, a disturbing finding at a time when debt and future retirement costs are major issues in such countries.

The Financial Industry Regulatory Authority’s Investostor Education Foundation’s study, called The Financial Capability of Young Adults - A Generational View, found that this age group displays “low levels of financial literacy, engage in problematic financial behaviours and express concerns about their debt”.

Only 24 per cent of millennials quizzed by FINRA are able to correctly answer four or five questions on a five-question financial literacy. And among young millennials – those 18 to 26 – only 18 per cent were able to answer four or five questions correctly.

The results will also interest the wealth management industry which realises that future clients will be drawn from the ranks of the younger generation.

The results of the study have been issued at the inaugural meeting of the President's Advisory Council on Financial Capability for Young Americans, FINRA said in a statement.

The results will cause concern as young US citizens, along with their peers in other nations, face issues such as college debt and pressures on traditional tax-funded pay-as-you go retirement schemes amid ageing population profiles. The findings come after TD Bank, part of Toronto-Dominion Bank, issued a survey showing millennials are highly cautious about money matters.

"Many millennials began their adult lives in the midst of the worst economic downturn in generations, and our survey reveals just how deeply and broadly the Great Recession has marked the financial lives of this generation of Americans. Unfortunately, far too many millennials trying to cope with these economic conditions have low levels of financial literacy and are wrestling with concerns about their debt," said FINRA Foundation President Gerri Walsh.

The Financial Capability of Young Adults paints a troubling portrait of this generation's behaviour and attitudes in an era of high underemployment and unemployment, a sluggish economy and tight credit markets, FINRA said.

Almost half (46 per cent) of millennials are concerned they have too much debt, slightly less but on par with gen Xers (50 per cent) – but much higher than the 38 per cent of baby boomers and 23 per cent of respondents from the silent generation who feel they have too much debt.

Some 43 per cent of millennials engaged in costly non-bank forms of borrowing in the last five years, like using pawn shops and pay day lenders. By contrast, 21 per cent of boomers and 8 percent of the silent generation used non-bank forms of borrowing.

The FINRA Foundation's new study is based on an examination of data from the FINRA Foundation's National Financial Capability Study (State-by-State Survey), which was developed in consultation with the US Department of the Treasury, other federal agencies and the President's Advisory Council on Financial Capability. Figures from the State-by-State Survey were collected through an online survey of 25,509 American adults (approximately 500 per state, plus D.C.), over a four-month period, July – October 2012.