Why is Financial Education Important for Youth?
People need to learn money management skills before they manage their own money. Why is financial education important for youth? Because it is so easy for financially illiterate young adults to fall into financial traps without even knowing it. Bad decisions about personal finance can take decades to fix. When youth get a quality financial education in how to manage their personal finances before they need these skills, they will be prepared when the time comes. Financially literate young adults stand a far greater chance of leading an abundant life of security from the start. Financial education is important for youth because it provides a powerful head-start in life.
Is it Important for Today’s Youth to Learn About Finances?
When confronted with the question, “Why is financial education important for youth”, one should reference empirical studies that show marked improvement in financial behavior after undergoing a financial education program. Although the diploma that high school students receive is a symbol of the knowledge they have gathered, it represents nothing about their knowledge in financial literacy, a basic proficiency which is needed to prosper financially. If you’re asking yourself, “Why is financial education important for youth”, looking at the impact financial education has on peoples’ lives will provide a clear answer.
The Deep Impact of Early Financial Education
Attending an employer-sponsored retirement seminar saw net worth increase by nearly 27% for those who were in the lowest income bracket and had not received a high school diploma. (Dartmouth). http://www.dartmouth.edu.
Researchers asked individuals two sets of questions, one pertaining to basic financial literacy while the other related to advanced financial knowledge. The researchers then applied statistical techniques to construct indexes of financial knowledge. The probability of participating in the stock market increased 14 percentage points with a one standard deviation increase in advanced financial knowledge. In addition, a one standard deviation increase in basic financial literacy increases the probability of saving for retirement by 20 percentage points (De Nederlandsche Bank). https://www.dnb.nl/en/binaries/working%20paper%20313_tcm47-257145.pdf
Without Financial Education, Youth Pick Up Surrounding Money Habits
Without Financial Education, Youth Pick Up Surrounding Money Habits
A statistically significant association was determined between negative financial habits, such as gambling among Australian youth, and the influence of peers and parents (Science Direct). https://www.sciencedirect.com/science/article/pii/S0140197103000137?via%3Dihub
In a survey by OECD, well over a quarter of respondents replied that their culture influenced their attitudes toward wealth (Organization for Economic Cooperation and Development). https://www.oecd.org/finance/financial-education/2017%20Seminar%20on%20financial%20education%20
and%20financial%20consumer%20protection%20LAC%20Wood%20.pdf
Lack of Financial Education in Youth Leads to Precarious Financial Life
26% of adults admit to not paying their bills on time (National Foundation for Credit Counseling). https://active.nfcc.org/newsroom/financialliteracy/files2013/nfcc_nbpca_2013%20financialliteracy_survey_datasheet_key%20findings_032913.pdf
15% of adults roll over $2,500 or more in credit card debt each month (National Foundation for Credit Counseling). https://www.nfcc.org/wp-content/uploads/2017/03/NFCC_BECU_2017-FLS_datasheet-with-key-findings.pdf
More than 20% of renters aged 18-24 overspent their income by $100 per month (Time). http://business.time.com/2013/01/17/todays-young-adults-will-never-pay-off-their-credit-card-debts
Only 16% of Americans between ages 18-26 are very optimistic about their financial future (Bank of America). https://bankofamerica.com
46 percent of respondents said they either could not cover an emergency expense of $400 or would cover it by selling something or borrowing money (Consumer Financial Protection Bureau). https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/102016_cfpb_FinancialLiteracyReport.pdf
Quality Financial Education is Critically Important to Today’s Youth
Graduates of the present education system often receive their diplomas with little to no knowledge of how to handle their personal finances. Many cannot even describe what a financial education is or understand basic principles. Inevitably, poor financial practices become ingrained at an early age and act as obstacles in reaching financial targets. Only with quality financial education, administered either in school or early on in the workplace, can these counterproductive practices be supplanted by habits that contribute towards the progress of financial objectives.
The Consumer Financial Protection Bureau (CFPB) discloses that intelligent programs should construct measures of financial well-being as well as level of financial competency (Consumer Financial Protection Bureau). https://files.consumerfinance.gov/f/201407_cfpb_report_financial-literacy-annual-report.pdf
The JumpStart Coalition asserts that Materials are objective and made for the sole purpose of informing rather than pushing a certain agenda. Materials correlate to standards but forth by states or leading councils and associations (Jumpstart.org). https://www.jumpstart.org
“The single biggest difference between financial success and financial failure is how well you manage your money. It’s simple: to master money, you must manage money.” – T. Harv Eker, author of Secrets of the Millionaire Mind
“I think people don’t understand compound interest because typically no one ever explains it to them and the level of financial literacy in the US is very low.” – James Surowiecki, journalist at The New Yorker and author of “The Financial Page” column
“Being promoted to a top position in your organization, or even being elected to public office, does not suddenly endow you with financial literacy, if you did not acquire and develop it, earlier in your life.” – Strive Masiyiwa, founder of Econet Wireless
Financial Education is Critically Important for Today’s Youth
After looking at the statistics above, ask yourself, “Why is financial education important for youth?” The answer is that early education in financial matters are correlated with positive financial outcomes. How can we rob our youth of such a vital skill that has been statistically proven to be associated with higher rates of saving and less financial stress? After asking the question, “Why is financial education important for youth”, and seeing the undeniable answers, those aghast at the lack of personal finance for youth can put pressure on education directors to implement program focused on youth financial education in high school and earlier.