Millennials Need Finance Education
June 30, 2014

We’ve all heard stories about the Millennial generation and how its members owe a lot of student loan debt and have trouble leaving their parents’ nest. The Financial Industry Regulatory Authority (FINRA) Investor Education Foundation recently released a survey discussing the states of Millennials’ finances.

Among the findings:

  • 46 percent of Millennials are concerned they owe too much debt.
  • 43 percent of Millennials have borrowed money in potentially risky ways, such as through pawn shops, within the past five years.

Many Millennials, which range 18-26 in this study, began their adulthood during the troubled economy, facing unemployment and underemployment as well as their parents’ financial challenges. So some of the circumstances they have faced have been out of their control. Still, the survey found that few Millennials have a high rate of financial literacy. When asked five questions, less than 25 percent could answer four correctly and only 18 percent responded to all five correctly.

The questions were:

  1. Suppose you have $100 in a savings account earning 2 percent interest a year. After five years, how much would you have?
  2. Imagine that the interest rate on your savings account is 1 percent a year and inflation is 2 percent a year. After one year, would the money in the account buy more than it does today, exactly the same or less than today?
  3. If interest rates rise, what will typically happen to bond prices? Rise, fall, stay the same, or is there no relationship?
  4. True or false: A 15-year mortgage typically requires higher monthly payments than a 30-year mortgage but the total interest over the life of the loan will be less.
  5. True or false: Buying a single company’s stock usually provides a safer return than a stock mutual fund.

The survey was conducted online, with more than 25,000 participants, in 2012. To learn more, including taking the quiz yourself and learning the answers, visit While this survey took place two years ago, may of the findings continue to ring true. The Millennial generation still struggles financially and starting off at such a disadvantage may affect its members for their entire lives.

So what can they do?

Unfortunately, personal finance is taught in few schools. To learn more, they can read personal finance blogs like this one, watch business news channels, such as CNBC and Bloomberg News, and read books by any number of personal finance experts. Many newspapers and magazines have personal finance columnists as well. Such research is a starting point.

For those with greater levels of income, it may make more sense to connect with a financial advisor, who can help not only with investing concerns, but in some cases, with basic budgeting. There are also some non-profit organizations and churches that provide weekly classes in basic budgeting and other introductory financial matters.

[Photo credit: KylePIB at en.wikipedia]

Disclaimer: The views expressed in this article are the opinions of the author and should not be interpreted as individualized investment advice. Investment objectives, risk tolerances and the financial situation of individual investors may vary. Please consult your financial and tax advisers before investing.

Susan Templeton

June 2014