As Young Money’s schools financial education week comes to an end, we look at what could be done to improve the low levels of financial education among millennials.
Financial understanding among millennials is low, with just 8% of them in a recent survey showing high levels of financial literacy. Confidence is even lower. As millennials approach important life milestones like buying their first home, getting married and having children, they stand to miss out if they are not able to demonstrate a good understanding of financial matters. So, in an ideal world, what can be done to improve financial education for millennials, particularly now many of this age group has left full time education?
More articles about millennial issues
Despite a number of sites launched in recent years catering for millennials and the likes of the FT running semi-regular features, there are still relatively few stories in the financial press aimed directly at millennials. Many journalists still focus on issues that affect older generations and stories are angled to suit them. So, there tends to be a focus on house prices rather than how to build up a mortgage deposit, and plenty about transferring defined benefit pension schemes rather than, for instance, getting under the bonnet of your defined contribution pension and understanding how returns compare to other funds.
More stories that look at the world from the point of view of a millennial would help to engage them and to make better decisions about how to manage their money.
Teach millennials how to find the right information
With so much information now available online, it’s easier than ever to keep up to date on what’s going on in the world of personal finance. And millennials are increasingly making their decisions online – considering an average of 12 sources before they make up their minds. But many report feeling overwhelmed and unsure about whether the information they are accessing is accurate and relevant.
It’s important that millennials are taught to distinguish between ‘good’ and ‘bad’ sources of financial information, whether that’s alerting them to well-respected sites or articles written by those well regarded in the industry or just doing some basic due diligence when looking at websites, such as looking at customer reviews and finding recommendations from trusted sources.
Take a financial driving test
We wouldn’t think about driving a car without passing some form of competency test, so why should financial education be any different? Personal finance is a crucial part of our lives and something we have to consider whether we’re 18 or 118 and yet many millennials have little to no idea how to manage their money. Former financial adviser and financial education advocate Jason Butler suggests the industry should introduce a financial ‘driving test’ before allowing people to use their products – doing so would give consumers a measure of protection and also help them make the most of what the product has to offer.
Make touchpoints with banks and other providers more meaningful
Millennials get few opportunities to interact with their banks and other financial institutions, so when they do, it should be as meaningful as possible. If your main form of contact with a millennial is through a bank statement, could you try and make it more engaging? This could be something as simple as offering a free budgeting tool to go alongside statements or a virtual reality game for student accounts where you learn how to budget as a student. For pensions, a breakdown of the performance of the companies invested in as part of the portfolio or a monthly spotlight on companies in the fund could pique millennials’ interest.
And make sure anything you send out is available for viewing on a smartphone – this is where millennials spend the majority of their time gathering information. They also have a huge appetite for doing their financial management via phone – almost half said this was their preferred method, according to a recent Legg Mason study.
Make good financial knowledge count towards their credit score
A problem millennials often cite is an inability to demonstrate they have good credit. This is down to a range of factors: many have shunned credit cards because they’re reluctant to take on any more debt, while others find that renting doesn’t count towards your credit score. Some exciting start-ups such as RentalStep have stepped in and are now providing a service that allows you to count regular rent payments and a good reference from the landlord towards your credit score. Why not take this further – these firms could add features to their products that give your credit score a boost for demonstrating good financial knowledge and saving prudently?
So while it’s more difficult to reach millennials, there are clear steps the government and the industry can take to help improve this age group’s financial literacy.