MADISON, Wis. (5/28/14)--Millennials have a difficult time grappling with debt--which they shoulder at a high rate--and don't demonstrate strong levels of financial literacy, a report by Filene Research Institute has found.
The findings are drawn from the first of four reports from Filene that will be released as part of a broader National Financial Capability Study, an effort that seeks to ferret out indicators of financial capability and evaluate how these indicators change between demographics (See News Now Dec. 18, 2013).
Two-thirds of "Gen Yers," or those born between the late 1970s and mid-1990s, bear at least one type of outstanding, long-term debt, such as student loans, mortgages or car loans, the report found. About 30% are dealing with two or more.
Further, more than 50% of credit card users report carrying a balance in the past year, and nearly 70% of respondents--5,500 in all--rated themselves as highly financially knowledgeable, despite the report also finding pervasive poor financial literacy based on responses to financial questions posed during the study.
Given their experience with financial education, credit unions have an opportunity to intervene and help address the growing problem, researchers said.
"With tactics that focus on debt management and financial literacy, credit unions can target the most problematic areas for Generation Y," researchers from George Washington University, a partner on the study, wrote.
Researchers also found that overconfidence and a reliance on alternative financial services, such as payday loans or pawn shops, exacerbates the financial problems.
The authors of the report also listed other insights credit unions should be mindful of:
"Gen Yers may be ambitious and driven, but a closer analysis reveals a generation deeply indebted and relying too heavily on alternative financial services," the authors wrote. "Credit unions should promote financial literacy through products and real-life behaviors in order to create a meaningful impact with young adults."