Data on millennials’ financial habits are diverse. While some research suggests millennials, those born roughly between 1982 and 2000, are good savers, other research shows the extreme financial difficulties members of this generation have faced, causing them to fall further behind than other generations when it comes to being financially stable.
Since many older millennials were just starting to spread their wings during the recession that began in 2007, and so many have been loaded down with the most student loan debt of any generation yet, this has caused a delay in many of the big moves people in their twenties and thirties might traditionally make.
Decisions such as buying a house, getting married and having children are goals that are further away for many millennials than they were for prior generations, due to these financial setbacks connected to the economy and student loan burdens.
But now, according to a new study, these aren’t the only concerning factors millennials face related to finance.
Millennials are educated — but not educated about finance
The study, conducted by PricewaterhouseCoopers and George Washington University, found that millennials in particular have a shockingly low level of financial literacy. In addition, the survey found that due to this lack of financial literacy, millennials could potentially wreck havoc on the U.S. economy. More than 5,500 millennials born between the early 1980s and the mid-1990s were included in the research.
Steve Barr, partner at PwC, commented, ‘Of the millennials that we surveyed, only 8% answered five out of five questions correctly and 24% answered three correctly.’
This is surprising, considering millennials are the most educated generation yet.
Millennials engage in risky financial behaviors
Here are a few of the most concerning findings from the study:
- When tested on financial concepts, only 24% of millennials demonstrated basic financial knowledge.
- Nearly 30% are overdrawing on their checking accounts.
- In the past five years, 42% of millennials used an alternative financial services product (Payday loans, pawnshops, auto title loans, tax refund advances, rent-to-own products).
- At least 54% expressed concern over their ability to repay their student loans.
- Over 20% who had retirement accounts took out loans or hardship withdrawals in the past year.
- Only 27% are seeking professional financial advice on saving and investing.
In addition, 4 out of 5 millennials have major debts, such as student loans.
Read more: 7 things debt-free people never do
“We saw all those risky behaviors both with the highly educated and folks that haven’t been fortunate enough to get higher education,” Barr said. He is concerned that the lack of financial literacy among millennials could really affect the future of the U.S. long-term.
Milennials’ financial illteracy could be a huge problem in the future
Annamaria Lusardi, Academic Director, GFLEC at the George Washington University commented, ‘Millennials owe a lot. They know too little. Millennials’ struggle with debt may eventually become our problem, too,’ she said.
Mr. Barr believes millennials need to become more financially educated and make better financial choices — fast.
“Millennials represent 80 million shoppers,” said Barr. “It’s very important to the economy that the millennials really get their act together from a financial literacy standpoint. It’s just time to begin to take on the responsibility,” he said.