Financial Literacy Vital for Future Generations
Today, more than 44 million Americans carry student loans with cumulative debt, totaling $1.56 trillion. According to a 2018 study from the Rockefeller Institute of Government this number has increased 144 percent in the last 10 years. That is an average of $35,454 for each of those individuals — in many cases enough for a down payment on a house or new car.
This is a reminder that it is more important than ever that young people become better attuned as to how to manage debt and plan for their future, so that important milestones like home-ownership, buying a car or being able to open a retirement account are not too far out of reach.
As a society, we need to place greater value in providing our youth with a stronger financial literacy foundation that will show them from an early age about saving, reducing and managing debts, and keeping expenses in check.
During Financial Literacy Month in April, we should all think about the skills students, young adults and even our returning veterans need in order to have a successful financial future. Financial literary pays valuable dividends for a lifetime.
According to a report from Visual Capitalist, an astounding 76 percent of millennial’s — members of our community age 23 to 38 — lack basic financial knowledge. Possibly this is because only 16.4 percent of all U.S. students are even required to take a personal finance course in high school or college.
New York is ranked 12 out of 50 in financial literacy in. In the same study, Connecticut ranks in the bottom half of U.S. states in financial literacy: 28 out of 50.
There are more than half a million public school students in Connecticut but only 7 percent of its school districts require their students to take a personal finance course. Champlain College’s Center for Financial Literacy gave Connecticut a failing grade in 2017, one of only 11 nationwide.
In January, New Jersey passed a new law requiring money management lessons to start in middle school, effective with the fall semester. The only problem is the New Jersey mandate was already in place for many years, but had been ignored.
Lacking education mandates on these matters, many young adults simply never develop the financial knowledge they need. As a society, we truly ought to require every young person to take coursework in financial literacy in all school districts for their own lifelong benefit.
Now, we are in a more complex world than ever, with debit and credit cards, spending and receiving money though payment apps such as Venmo, investments in the stock market through online apps like Robinhood, and online budgeting through services such as Mint.
While the same lessons still apply, younger generations have more easily accessible ways to spend and accumulate debt without them ever seeing paper money change hands, like subscription services and online shopping. By removing physical barriers to spending such as these, people tend to be less cautious and more likely to lose control of their finances.
It is our responsibility as a society to see that every person is financially literate. As community and business leaders, adults, educators and parents, we share a responsibility to prepare the next generation to enjoy the full blessings of American life.
That starts with helping them learn skills today on how to make the decisions tomorrow that allow them to gain an affordable higher education, purchase a family home, pursue a small business dream and someday be able to afford retirement.
Written by: Judith Corprew is Executive Vice President-Chief Compliance & Risk Officer at Patriot Bank.