Millennials are now the largest and most educated generation in America. Their financial decisions significantly impact the future of the U.S. economy. However, a study by the TIAA Institute found that only 16% of millennials are financially literate.
Financial literacy is key to financial wellness. Financially savvy consumers can strengthen the economy and help reduce societal poverty. Millennials’ ability to make smart financial choices is crucial not only for their own financial health but also for their communities.
Being financially literate helps millennials understand money management and equips them with the tools and knowledge to make sound decisions, especially in these areas:
– Savings: Millennials should save for both short- and long-term goals. Maintaining a savings cushion for emergencies is essential. Setting aside at least three months’ worth of expenses is crucial for financial wellness.
– Budgeting: A realistic budget and the discipline to follow it are vital for managing money. Create a plan for monthly expenses, everyday spending, and an emergency fund.
– Loans: Building and maintaining a good credit score is important for taking out loans for larger purchases. Starting with a credit card that you pay off every month is a good way to improve your score.
– Mortgages: Getting a mortgage is often necessary to buy a home. Learning about mortgages and finding the best rates is key, as a house is likely the biggest purchase you’ll make.
– Retirement Savings: Saving for retirement is important and should start early. With potential changes to Social Security, it’s crucial to save independently for the future.
In my experience, the biggest gaps in millennials’ financial knowledge relate to debt and emergency savings. Many millennials are heavily in debt due to student loans, auto loans, credit card debt, and more. Additionally, many don’t realize that borrowing against their assets can harm them long-term. For example, they might not know about the penalties for early 401(k) withdrawals or how they lose out on compound interest benefits.
Millennials are often unprepared for sudden economic changes. Many lack an emergency budget, and if they have one, it often isn’t enough to cover more than a month of expenses. A 2017 NEFE study found that nearly half of millennials couldn’t cover a $2,000 emergency expense. Only 32% had enough savings to cover up to three months of household expenses, and nearly 30% had overdrawn their bank accounts in the previous year.
For millennial (and all other) members, Affinity Federal Credit Union offers various resources to help achieve financial literacy and learn how to save effectively. Four of these tools include:
1. Enrich: A personalized online educational platform with modules, articles, and tools on money management, personal credit, insurance, retirement, and other important topics.
2. Kofetime: Another online educational platform offering financial guidance through interactive courses, webinars, and money-saving tools to help users establish a savings plan for the future.
3. Events & Seminars: Members can access live webinars where experts cover various financial topics such as budgeting, credit, identity theft prevention, and investments.
4. Consumer Credit Counseling Services: Provided free of charge through Navicore Solutions and Consolidated Credit, these services include meetings with a financial coach who can help members understand credit and set up financial strategies.
No matter where our millennial members are on their financial literacy and wellness journey, Affinity offers the expertise and resources to help fill the gaps in their knowledge. Making smart financial decisions will reduce stress for members and benefit our communities. Don’t hesitate—utilizing these resources will bring you one step closer to reaching your financial goals.
This information is intended for general guidance and does not constitute legal, tax, or financial advice. Each person’s circumstances are different, and the specific information provided may not apply to everyone. You should seek the advice of a financial professional, tax consultant, and/or legal counsel to discuss your specific needs before making any financial or other commitments.
