While young people are being exposed to and have interest in new financial products and technologies, they don’t necessarily have the confidence or tools to properly engage with them and manage their personal finances. This was a key takeaway from EVERFI’s latest State of Financial Literacy Report, an annual survey that pulse checks high school juniors’ and seniors’ financial attitudes and preparedness for their financial futures. Here are some of the major findings from this past school year and how to navigate and address them.
Preparedness for Adulthood
High school juniors and seniors have a number of challenges awaiting them as they enter adulthood. Student loan debt, soaring housing costs, inflation and high cost of living, an unstable job market, and the rise of the gig economy that leads to inconsistent income which make long-term budgeting more challenging, are just a few. All of these factors can leave a young person feeling discouraged and hopeless, particularly if they don’t have the skills or means to combat them. Introducing students to financial education while they are in high school – if not before – is essential because it highlights what is in their control, despite so many outside factors that aren’t fully in their control. This, in turn, builds confidence and the likelihood that they will take actions that lead to positive financial outcomes. Given that six in 10 young people are underprepared to manage credit according to EVERFI’s survey, when they will soon make decisions involving credit, there is no better time to insert such topics into an existing curriculum and provide tangible, real-world skills that are immediately or shortly applicable.
Confidence-Building vs. Knowledge-Building
While it’s critical to lay the foundation for financial literacy in schools in the hopes that students will retain the material beyond classroom walls, what is equally important, if not more long-lasting, is building confidence. According to the survey, 76% of students feel unprepared to fill out a Free Application for Federal Student Aid (FAFSA), and 69% said that investing is intimidating. Topics like financing higher education and investing in the stock market can feel daunting to anyone who doesn’t have a solid background on what they entail. However, by building students’ confidence that they can tackle these milestones, they’re more likely to take action. They may also avoid common pitfalls such as not having a plan to pay back student loans, not feeling prepared to calculate the right amount of student loans to borrow, or making poor investment choices. Particularly if young people aren’t talking to their parents about money at home or receiving financial education elsewhere, a feeling of overwhelm can lead to inaction or improperly managing personal finances. Such was also observed in EVERFI’s research study with Edward Jones, indicating that students had intentions of making financial investments after the completion of EVERFI’s Marketplaces: Investing Basics™ course.
Where Teenagers Receive Financial Information
EVERFI’s survey demonstrates that many young people aren’t talking to parents or guardians about financial topics at home. In fact, only four in 10 upperclassmen do so. This could be for a number of reasons, ranging from parents’ own insecurities about their financial knowledge to teenagers not feeling comfortable raising the topic because they haven’t been exposed to it enough to seek help. This highlights the need for financial education in a trusted setting like the classroom to provide students with research-backed, trustworthy information. However, one does not have to replace the other; in fact, students conversing with their parents about financial topics as they become exposed to them is vital in helping shape their own relationships with money. Research from the MassMutual Foundation shows that these conversations are more likely to happen when students are exposed to financial education in school. As adolescence is a transitional period filled with changes, digital education in school can ground students in the foundational elements of financial education, which can then be supplemented by parents providing advice based on their own unique experiences or challenges.
The Importance of Timing for Financial Education
High school, particularly in a student’s junior or senior year, is the right moment for young people to be exposed to financial education to help set them up for success as emerging adults gaining financial independence for the first time. This is due in part because teenagers are being exposed to financial tools more regularly. In fact, eight in 10 upperclassmen use or plan to use peer-to-peer payment apps. However, over half of those surveyed are underconfident about being able to use them safely or identify scams. Confronting students at this age can help lay out the building blocks for navigating the kinds of tools and hurdles that young people will face both in the short-term and long-term.
Since April is Financial Literacy Month, it is the ideal time to reflect on how your financial institution is prioritizing and investing in the next generation of potential customers. Sponsorship of financial education in classrooms helps to deliver critical topics on budgeting, saving, and investing to young people to build financial knowledge and confidence to take the next steps in their future futures. Learn more about how you can attach your brand to education that can make a direct and lasting impact at everfi.com/sponsorship.