April is Financial Literacy Month. More than anything else, it's a time to hone healthy financial habits. And no generation needs to do this more than millennials (those age 18 to 34).
According to results from the FINRA Investor Education Foundation's national Financial Capability Survey, only 24 percent of millennials are categorized as having high financial literacy—meaning they answered four out of five questions on a five-question financial literacy quiz correctly. This compares to 38 percent of gen Xers, 48 percent of boomers and 55 percent of silent generation investors. To test your financial knowledge, take the quiz.
Millennials also fall short of older generations in other financial areas:
• Making ends meet. Many of the millennials surveyed don't. Almost a quarter (23 percent) reported spending more than their income, compared with 19 percent of gen Xers, 16 percent of boomers and 14 percent for members of the silent generation. This may help explain why almost half of millennials are concerned they have too much debt.
• Turning to non-traditional financial services. Compared with other age groups, a larger proportion of millennials use high-cost, non-bank borrowing services to make ends meet, such as pawn shops, rent-to-own stores, auto title loans, payday loans or advances on a tax refund. Forty-three percent of millennials engaged in costly non-bank forms of borrowing in the last five years. By contrast, only 21 percent of boomers and 8 percent of the silent generation used non-bank forms of borrowing.
On the Brighter Side
While millennials face very real economic challenges, many are taking a vital step toward securing a solid financial footing. They are setting up rainy-day funds. More than a third of millennials (33 percent) indicated they have started an emergency fund. While there's room for improvement, this figure is encouraging and is on par with older gen Xers. A savings cushion can be used for unexpected expenses and to help deter the need for high-interest debt.
There's more encouraging news. Thirty-six percent of millennials were offered financial education either in high school or college, or by an employer—the highest rate of any generation. Combining this with sound financial information during Financial Literacy Month can help millennials move from a state of financial struggle to greater financial independence. Time is on their side.
For more information about saving and investing, visit the investors section of FINRA.org.
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