Who has low financial literacy?
On average, 56 percent of young adults age 35 or younger are financially literate, compared with 63 percent of those age 35 to 50. Financial literacy rates are lower for adults older than 50, and rates are lowest among those older than 65.
Some high school students, most of them aged 14-18, are not interested in learning about retirement funds. They don't care about managing debt, or budgeting or saving. Derderian's solution is to start students on their path toward financial literacy much sooner than high school.
Financial literacy rates are among the lowest in Generation Z — and we want to change that. Gen-Z for Financial Literacy is on a mission to ensure that today's students know how to manage their money. Through our various projects, we hope to bolster youth financial literacy rates.
The lack of financial literacy can lead to many pitfalls, such as accumulating unsustainable debt burdens, either through poor spending decisions or a lack of long-term preparation. This, in turn, can lead to poor credit, bankruptcy, housing foreclosure, or other negative consequences.
A person who is financially illiterate may inadequately save for retirement, spend more than their budget allows, and make other financial decisions that provide short-term gratification but result in negative long-term consequences.
A study conducted by FINRA found that millennials are the age group with the lowest levels of financial literacy. Only 16% of American students are required to take a personal finance course to graduate high school. Only about 24% of millennials demonstrate basic financial knowledge.
Just under two-thirds of Americans (64%) are financial literate, while over one in three (36%) are not. Financially literate Americans are led by Baby Boomers (71%), Gen X (63%), and Millennials (59%) while Gen Z (42%) trails behind.
Generation Z
Thus, those in Gen Z are currently between the ages of about 11 and 26. As might be expected due to their relatively young ages, data shows that Generation Z demonstrates the lowest level of financial literacy among Gen Z, Gen X, boomers and millennials.
More than half, or 53%, of Gen Zers say higher costs are a barrier to their financial success, according to a separate survey from Bank of America. In addition to soaring food and housing expenses, millennials and Gen Z face other financial challenges their parents did not as young adults.
As societal trends continue to evolve, the narrative surrounding generational intelligence unfolds with fresh perspectives. A growing discourse suggests that Generation Z (Gen Z) is endowed with higher cognitive abilities compared to their predecessors, the Millennials.
Why is financial literacy declining?
In fact, much of the downward trend in financial literacy can be traced back to respondents increasingly selecting “don't know” as their response option to the underlying questions. The rise in “don't know” responses accounts for 75 percent of the drop in financial knowledge from 2009 to 2021.
In fact, according to research, more than 40 percent of college students are not equipped with financial literacy knowledge and skills. Top personal finance concerns among college students include the cost of higher education, student loan debt and credit cards.
Whether it's lack of knowledge about banking, credit cards or ways you might become a victim of financial fraud, financial illiteracy could leave you with unnecessary fees, a low credit score and difficulty borrowing money.
U.S. adults have big gaps in their financial knowledge
For instance, adults correctly answered, on average, 50% of the 28 basic money questions in the 2022 TIAA Institute-GFLEC Personal Finance index, the sixth annual barometer of financial literacy.
Lower savings and investments since financially illiterate individuals often lack knowledge to make informed decisions about savings and investing, which can have an impact on economic growth at the national level, and limited access to financial services.
Financial literacy is having a basic grasp of money matters and its four fundamental pillars: debt, budgeting, saving, and investing. It's understanding how to build wealth throughout one's life by leveraging the power of these pillars.
New Mexico has the lowest literacy rate in the US, with a rate of 70.9%. California has the second lowest literacy rate, at 71.6%, while both Texas and Mississippi have literacy rates of 71.8%, making them the third and fourth states with the lowest literacy rates in the US.
Among the overall population, Millennials are the age group with the lowest level of financial literacy. When tested about basic concepts around numeracy and mortgage, Millennials scored better.
60% of the richest households have a 31% financial literacy rate. 40% of the poorest households have a 23% financial literacy rate.
On average, men score higher than women by 4 points out of 100 in financial knowledge, but in some countries such difference is larger than 10 points (Figure 12.1). Financial knowledge is measured by looking at familiarity with financial concepts such as inflation, interest compounding or diversification.
How many Americans live paycheck to paycheck?
How Many Americans Are Living Paycheck to Paycheck? A 2023 survey conducted by Payroll.org highlighted that 78% of Americans live paycheck to paycheck, a 6% increase from the previous year. In other words, more than three-quarters of Americans struggle to save or invest after paying for their monthly expenses.
Millennials set to be the 'richest generation in history' thanks to $90 trillion wealth transfer.
Generation Z stands as the most frugal generation, spending only $41,636 for the year. What different demographics spent their money on is an eye-opener, too. For instance, Generation X and Millennials spent the most on housing, with $26,385 and $24,052, respectively.
Not just growing pains: Gen Z reports suffering more than other generations did at their age. A new study from Gallup shows a crushing youth mental health crisis, because teens are more tuned in than ever.
This belief stems from a variety of factors, but a major reason is the current job market. Minimum wage is largely stuck at the same as it was 13 years ago and Gen Zers don't believe the pay they get for the work they do allows them a good quality of life, the McKinsey study cites.
