Our Opinion: An education gap in financial literacy

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A variety of studies conducted over the last couple of years on the financial acumen of young people arrived at the same basic conclusion — they don't know enough. It's a problem for them individually, and as they move into a financially complex world they will come to dominate demographically, it's a potential problem for the nation itself.

In a 2016 study by PricewaterHouseCoopers and George Washington University of 5,500 millennials born between the early 1980s and the mid-1990s, only 5 percent answered five out of five questions related to financial literary and only 24 percent got three correct. The study concluded that their lack of education led them to risky financial behavior — regularly overdrawing checking accounts, taking out hardship withdrawals on investments, rolling up major debts, inadequate awareness of late charges on credit card payments, signing high interest loans — that because of their substantial demographic numbers could jeopardize the health of the economy as a whole.

It's striking that millennials are so lacking in financial education given that according to a recent Pew Research Center report, they are the best educated generation ever by the measure of bachelor's degrees achieved. But a 2015 study by Bank of America found that only seven percent of millennials surveyed had ever taken classes, read books or used any online resources to learn about personal finances. (Let's give millennials a break by pointing out that in a 2013 study by the Council for Economic Education, only a third of adults over the age of 50 could get a passing grade in basic financial literacy.)

While Eric Swansburg, a business teacher at King Philip Regional High School in Boston, was dismayed at the low scores his students got on a 100-question test he recently conducted on saving, investing, banking and other financial matters (State House News Service, Berkshire Eagle, October 12), he was pleased to find that a sizable majority of his students wanted to learn more. Studies have indicated that while millennials don't score well on financial knowledge, they are concerned and want to address that inadequacy. Our schools can help.

Twenty states require students to take a high school economics class to graduate and 17 require a course in financial literacy. Massachusetts does neither. Several bills are before the Legislature to address this shortcoming, including one backed by the financial education coalition MassSaves that would require state education officials to implement standards and objectives in personal financial literacy in public schools. The financially literate know that there is no free lunch, so whatever the state decides to do, however welcome, it must provide financially strapped schools with the resources. (A plan announced by UMass to create a free internet financial literacy program open to state universities and high schools should be of great benefit.)

"It's very important to the economy that the millennials really get their act together from a financial literacy standpoint," warned Steve Barr, a partner in PricewaterHouseCooper, following its study last year. Millennials do have that responsibility and most are assuredly willing to meet it. But they need help, which is where the schools come in.


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