Facts About Youth Financial Knowledge & Capability
Teaching financial capability is important because youth are increasingly facing higher levels of debt:
- The average debt of students when they graduated from college rose from $18,550 (in 2004) to $28,950 (in 2014), an increase of 56 percent.1
- From 2004 to 2009, the median credit card debt among college students increased 74 percent.2
Unfortunately, many youth have not received either formal or informal guidance on financial matters. So, they may not be ready to make sound financial choices:
- A survey of 15-year-olds in the United States found that 18 percent of respondents did not learn fundamental financial skills that are often applied in everyday situations, such as building a simple budget, comparison shopping, and understanding an invoice.3
- A report on the results of a financial literacy exam found that high school seniors scored on average 48 percent correct, showing a strong need for more comprehensive financial education for youth in high school.4
- According to the 2008 wave of the National Longitudinal Survey of Youth, only 27 percent of youth knew what inflation was and could do simple interest rate calculations.5
Financial illiteracy is more common among low-income individuals because they typically do not have wide access to accurate financial information. With such illiteracy, youth in low-income households can fall victim later as adults to scams, high-interest rate loans, and increasing debt. Training low-income individuals in financial management can be an effective way to improve their knowledge in five areas:
- predatory lending practices,
- public and work-related benefits,
- banking practices,
- savings and investing strategies,
- and credit use and interest rates.6
Young people often learn about money informally through socialization, such as observing and listening to their caregivers, influential adults, and peers. Youth are not consistently introduced to more formal instruction on money matters—for example, through a classroom curriculum or other training on saving, spending, allowances, and the importance of focusing on short-term goals (i.e., purchasing an item, saving money, paying off a debt) to be able to get to long-term financial goals (i.e., saving for college, buying a house).7
Distinguishing what youth do not understand about financial topics is important. It is also beneficial to understand the specific concerns that youth have when it comes to money.
A survey of a diverse group of youth and adults regarding what they wanted to learn about finance, found that concerns among youth differed within youth groups depending on their background.8 The survey also found a disconnect between what adults thought youth should learn and what youth prioritized, for example:
- Pregnant or parenting teens and teens in the juvenile justice system or on probation were most concerned about learning how to save money for a home; whereas migrant teens and teens in school were most interested in learning how to save money for college.
- Almost 70 percent of adults in the survey felt that teens should learn about how to complete and file a tax return form, but only 39 percent of the teens were interested in learning about this topic.
- However, more than half of the teens in the juvenile justice system or on probation and almost half of the migrant teens showed an interest in learning how to complete and file a tax return.
- Although a majority of teens wanted to learn about money, more than half wanted to learn in an easy way. This could include strategies that are convenient, utilize technology, and are not time consuming for youth.
Money as You Grow
Parents and caregivers can use the tips, conversation starters, and activities to help their children gain the “building blocks” that lead to strong money skills, habits, and attitudes in adulthood. Features the Money as You Grow book club, for parents of children ages 4 to 10.
Teaching Young People About Money: Tips for Parents and Caregivers
The FDIC provides tips and tools that parents can use to teach their children the facts about earning, spending, and saving money at any age.
What's in Your Piggy Bank? Motivating Young First-Time Workers to Save
This recorded webinar highlights the First-Time Workers program, a pilot project from Young America Saves, which promotes saving at work for young adults, ages 16–24, as one effort to increase overall workplace saving.
Hit the Road — A Financial Adventure (from the National Credit Union Administration)
Hit the Road takes users on an interactive, virtual road trip across the country, but the journey is not easy. They must save and spend money wisely to complete challenges along the way.
1 The Institute for College Access and Success, 2015
2 Lusardi, Mitchell, & Curto, 2010
3 Organisation for Economic Co‑operation and Development, 2014
4 Mandell, 2008; 60% was considered a passing score
5 Lusardi, Mitchell, & Curto, 2010
6 Zhan, Anderson, & Scott, 2006
7 Shim, Serido, Bosch, & Tang, 2013; Kim & Chatterjee, 2013; Danes, Rodriguez, & Brewton, 2013
8 Varcoe et al., 2001