Within 10 years, Gen Yers will make up three quarters of all global workers. It's important for credit unions and for the economy at large that they make good financial decisions. They're off to a bad start.
Financial behavior around simple but important issues like inflation, mortgages, and risk diversification will determine household wealth for young adults. So we asked Filene Research Fellow Annamaria Lusardi, one of the world's foremost experts on financial capability, to tell us how much they know. The answer: not much.
Only 8% could correctly answer five simple financial capability questions even though 70% rated themselves as having high financial knowledge. That's a recipe for bad decisions in borrowing, investing, saving and almost everything else credit unions care about.
Now, it's a time-honored tradition for each generation to wring its hands over the prospects of the next, but more financial literacy classes are not the answer. Instead, technology may make it easier than ever to bridge Gen Y's knowledge gap.
Lusardi suggests a few ground rules for help that will reach those who would never sign up for a lecture:
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Address debt and debt management information in existing channels like mobile and online banking.
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Because overconfident Gen Yers are unlikely to seek out advice, build knowledge tools that are intriguing and built into day-to-day interactions.
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Information will be more effective if it addresses specific products, like student loans, mortgages and credit cards.
Ben Rogers is research director at the Filene Research Institute. He can be reached at 608-661-3745 or [email protected].
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