Millennials Get a 'D' in Financial Literacy, but Here's How to Raise That Grade

NEW YORK (MainStreet) — Younger Americans should circle the calendar next month, because it's financial literacy month.

Why younger Americans? Because in a test administered by the federal government, Millennials earned a grade of 69% — "D'" territory in school.

That's a big deal, considering the average Millennial has $45,000 in debt during their 20s. And younger financial consumers just don't seem to know what to do about their lack of financial knowledge.

A big part of the issue is behavioral, with spending being affected by some particularly toxic habits. "One of the biggest problems my generation faces are impulse buys propagated by the Internet," says Ben Goldman, head of business development at Agency 2625, a San Francisco marketing agency. "With entire marketplaces like Etsy and Kickstarter, as well as targeted situational ads on most sites, many Millennials just keep dropping a few dollars here and there until they realize they are broke every month and don't know why."

Goldman says Millennial trends have started slipping out of the Internet and into living costs such as clothes and food. "Many of my friends own ridiculous amounts of clothes and go out to eat five or more times a week," he says. "That's because we've been told this is the best way to live and can easily fit within a month-to-month income. Because of high spending, most people in my generation have lost the ability to save up money for when they need it."

There's also little interest in planning for a secure financial future.

"Most Millennials are concerned enough to invest in their future by going to college, but after graduation they are unprepared for how to handle their finances and where to invest their income," says Stacie Turner, a St. Louis, Mo., financial services professional. A Millennial herself, Stacie started her own individual retirement account contributions at 22.

Other Millennials agree that "when you're in your early 20s, or early 30s too, the last thing you think about is saving for retirement," says Jill Jacinto, an associate director at the women's career site Works and a millennial career expert for AOL Jobs. "Most young adults have enough issues paying for their lunch, much less planning out 50 years down the line. The best advice new graduates should take is to start saving their paychecks now and don't live from paycheck to paycheck. You'll never get anywhere doing that."

By spending more than you earn, you'll be digging yourself deeper and deeper into financial regret, Jacinto adds. "Sure, living in a studio apartment in New York City is amazing, but at $2,000 per month, it kills your budget. Fast-forward 50 years and you'll be sorry you didn't budget and live with roommates in Brooklyn."

To get the financial literacy needed to start making smart long-term money management decisions, Millennials need to strike out on their own. "Preparing Millennials for their financial future begins with financial education," says Gina Constantino, a Millennial and marketing associate in Orange County, Calif. "Since many high schools don't include financial education in their curriculum, Millennials should seek out alternative resources, like financial blogs [and] tweet chats, and start following personal finance bloggers and influencers on social media — especially Facebook, Twitter and Instagram. Those steps would be hugely beneficial to younger people looking to expand their financial knowledge." 

Another good thought: Families should talk about and teach financial matters from a fairly young age, Constantino adds. "If we can teach children how to save money, where to allocate money and help them understand the power of compound interest, we could ultimately reduce the amount of high-interest credit card debt in America and create a generation of savers and smart consumers, rather than spenders."

 — Written by Brian O'Connell for MainStreet

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