As the Millennial generation takes wing—the oldest will turn 36 next year—it is becoming clearer that its lack of financial literacy poses great risks, according to an analysis that Right About Money has examined ahead of broad release next week.
Collectively, young adults are building an impressive personal and investment portfolio. Some 80% have at least some college and 44% have at least a four-year degree. Nearly all of them have a checking or savings account and 58% have begun to save in a retirement account. A quarter own stocks or bonds and 45% own a home.
These data points were gleaned from a new wave of information taken from the FINRA Investor Education Foundation’s 2012 National Financial Capability Study and analyzed by the National Endowment for Financial Education. They suggest that Millennials have got the important message that they must begin to save.
But the new wave also highlights a host of this generation’s financial miscues, calling attention to its lack of formal financial education. Just 23% of Millennials say they have received any formal lessons in credit, budgets, money management, investing or any other element of personal finance, according to NEFE. They are generally confident in their money skills but only a quarter demonstrate basic know-how and just 7% demonstrate a high level of financial literacy.
Along with Millennials’ penchant for investing in itself the generation also is accumulating massive liabilities: 70% have at least one source of long-term debt and 34% have two. Much of this is the result of student debt and mortgages, which may be considered good debt.
But Millennials may have taken on a bit too much of a good thing: about a quarter have raided their retirement savings and another quarter are overdrawn on their checking account. A similar percentage is under water on their home, late with mortgage payments and have unpaid medical bills. Half of those with student debt say they will never be able to repay it.
Many Millennials also engage in expensive credit card habits, such as owing late fees and paying only the minimum monthly amount due, NEFE found. A generation that will grow old without a pension or secure social safety net must learn how to start building wealth at a young age. Millennials have a good start on the saving part. But they are whiffing on the liability side. These are issues that should be addressed in financial education programs at work for Millennials—and in school for the next generation.