Its rather shocking to know that a superpower, like America, which is the most developed nation of the world, has about half of its youth financially illiterate or very poorly financially literate! A nationwide survey conducted by the National Foundation of Credit Counseling reveals that young adults between the age group of 18-34 are hopelessly lacking in money management skills. The survey conducted on 1000 young adults including fresh professionals shows 47 % of them grading themselves Cs, Ds and Fs. They fared poorly in basic money management skills like budgeting amoney management skillsnd saving. What is more disappointingly surprising is that even well-educated tech-savvy youth also fall in the bracket of the financially uneducated. No wonder these young working professionals don?t have any idea of saving for retirement. This is an issue of concern to financial experts who feel that the hardships of retirement will catch these youth unawares later. Read the SunSentinel report.
I?m amazed to know that about 2/3?s of American youth don?t know that currency depreciation takes place during inflation; non-business people can also buy stocks of companies; and what budget deficit and national debt mean and imply.
Reasons for Financial Illiteracy In Youth
- Parental Illiteracy and/or negligence and other factors- Studies reveal that a majority of school and college students rely on their parents for financial education, but many parents have not given or stopped giving them any advise. It?s become rather common for a parent to give in to the financial demands of their children with quoted amount, rather than ask for a justification of the amount demanded. Firstly, because both parents work or are paid handsome salaries they don?t find it necessary to teach frugality to their children. Second, their busy lifestyles simply don?t seem to be allowing them to focus upon the skills development of their children. Third, the child will not listen to the parents and pester them till the allowance is granted.
Only 25-27 % parents are confident of their money management skills. As a majority of parents themselves were not sound with their financial education, they could not teach their children effective strategies of handling money. More than half parents don?t put any restrictions on their children?s expenditure. Many parents think that children are given sound financial education in school which was not quite true till a few years ago. Only organizations like Jump$tart Coalition and National Council of Economic Education have started this.
- Learning the skills on their own- Quite a number of children say that they?ve learnt their money management Financial Illiteracyskills on their own while doing part-time jobs. Now, this might teach them how to just save up a buck or two, but it will not definitely teach them the most effective ways of saving their money and multiplying it., unless they are gifted with the talent, which is a very rare thing to see.
Why Is Financial Literacy So Very Important For Today?s Youth?
Financial literacy is not only about commonsense, as many of us figure it out to be. True, by exercising your grey cells, you don?t take foolish decisions. But to utilize your finances in the best way possible and multiply it, you need much more than commonsense. You should know, at least, the basic concepts of personal finance so that you utilize the resources, laws and tools available to you to the best advantage. You might be accumulating your salary in your savings account every month, but if you don?t know how to channelize it to high-interest earning pockets you?re not making the best use of your money. If you want to make a major purchase like a house or a property you should know about the conditions on which you can take a loan from banks, the best interest policies that you can avail and insurance options. At the time of economic recession, every responsible citizen should know well why it had happened and take steps to rectify it. We can?t afford to have a novice Gen Y taking over the reigns of the economy of the country without sufficient knowledge and exposure.
More than half the college crowd feels that they cannot control excess expenditure. A rendezvous with an online budgeting websites like Quicken Online, Wesabe, and Thrive?? can solve this problem to a great extent. A 2003 US Senate research reports that fresh college students are given more than 8 credit cards when they join college. What else do you expect of such a facility? Excessive bank debt and bankruptcy! No wonder about 45 % of students in that year had a credit debt with an average debt of $3066! First they should be educated about the efficient and honest usage of a credit card and the risks of inappropriate usage and then they should be given the liberty to use them. Can you believe that colleges are losing students more out of credit debt than academic failure?
money managementWhat Should Be Done To Improve Financial Literacy Of Youth?
It?s amazing to note that only about 21 percent of youth between 16 and 22 years have taken a course in financial literacy. A course in financial literacy is mandatory in only 4 states of the country. Every college should conduct financial literacy courses. In fact, the education should start from the primary levels, in schools. Teachers should extensively avail resources and impart financial education in an interesting and interactive manner. College students can join online self-learning courses or attend courses in college. If teachers don?t have enough expertise, they should hand over the responsibility of educating students to bank professionals and financial institutions.
?Financial literacy is not an end in itself, but a step-by-step process. It begins in childhood and continues throughout a person?s life all the way to retirement. Instilling the financial-literacy message in children is especially important, because they will carry it for the rest of their lives. The results of the survey are very encouraging, and we want to do our part to make sure all children develop and strengthen their financial-literacy skills.