When it comes to knowledge about even the most basic aspects of their personal finances, millennials seem to be in the dark.
Millennials are used to getting a lot of flak from older generations. Sometimes referred to as the me generation, they have been labeled by some as lazy, self-entitled and narcissistic.
As a millennial, you know these accusations against your generation aren’t true. You’re not lazy, your workplace and life values are just different than those of the generations before yours. You’d rather be living your life than worrying about money. You value freedom and fun. You grew up in the digital age where social media is a significant part of your social life.
Not only that, but you’ve been dealt a pretty tough hand economically. You grew up during the Great Recession. You face challenges that your parents and grandparents never really had to deal with, like massive student loan debt and high rates of unemployment right out of school.
Can You Get These Right?
Worrying about your finances may seem like a chore, and a recent study has revealed that many millennials are not as financially literate or responsible as they could be.
The study asked 20-somethings 3 basic personal finance questions:
- Do you think the following statement is true or false? Buying a single company stock usually provides a safer return than a stock mutual fund.
- Suppose you had $100 in a savings account and the interest rate was 2 percent per year. After five years, how much do you think you would have in the account if you left the money to grow: More than $102, exactly $102 or less than $102?
- Imagine that the interest rate on your savings account was 1 percent per year and inflation was 2 percent per year. After one year, would you be able to buy more than, exactly the same as or less than today with the money in this account?
Do you know the answers? Most of the participants in the study didn’t do very well. If each question was worth one point, the average score was only 1.8, and only 25 percent answered all three questions correctly. Here are the correct answers so you can compare your own and see how financially literate you are:
- More than $102
- Less than today
The same study found that participants showed responsibility in only one out of these three categories: paying off debts on time, budgeting and saving for retirement. Additionally, only 2 percent showed responsibility in all three categories.
So what gives? Even with boundless financial knowledge available at your fingertips via the Internet, personal financial planning seems to be a common struggle for an entire generation.
If you’re one of the average millennials who couldn’t answer those three questions, it’s certainly not too late to start learning. Time is on your side when it comes to making investments in your future and starting to plan for retirement. Start saving, ask for help from people you trust, consider professional financial advisement and take advantage of the bounty of free apps and tools online.