Having worked in the banking industry, I had the privilege of interacting with a variety of people across all age groups and socioeconomic backgrounds. My customers allowed me to share in all of their experiences with them— the joy of signing the note on a first mortgage, the excitement that comes with opening that first savings account with piggy-bank money, and the sorrow that comes with losing a spouse, a parent, a child, or a friend.
From my experience, on more than several occasions, young adults who sought to open their first bank account had absolutely no idea how to use a bank. I would take the time, open their account and have a discussion with them about how to withdraw money, how to use a debit card, how to write a check, the importance of a savings account, and the smart ways to build credit.
Financial illiteracy in young adults will affect how they chose to handle their finances. It is paramount for advisors to understand the shortcomings of young adults in financial literacy so that they may better cater to their needs.
A generational crisis
According to a National Financial Capability Study from 2012, Millennials generally have inadequate financial knowledge. Of those surveyed 24 percent of millennials, demonstrated basic financial knowledge with only eight percent demonstrating a knowledge of high financial literacy. Two-thirds of all Millennials have at least one source of outstanding long-term debt and nearly one-third are overdrawing on their checking accounts.
What is even more concerning, however, is that only 27 percent of those surveyed sought assistance on saving or retirement within the past five years. Also according to PWC, only 12 percent had sought professional advice on debt management.
These statistics are definitely frightening and even possibly untenable. So many questions come to mind when thinking about how this may have happened. Where do the gaps lie? How are Millennials not receiving this information? Ultimately, what will the solution be?
Improving education among young adults
There are culture shifts that need to occur that include more financial literacy programs in the education system – preferably starting at the elementary school level and continuing to focus on increasingly complex topics as children get older. Parents need to understand that this information is important, and must ensure that they start teaching children at a young age.
For financial advisors and bankers, these types of cultural shifts are largely outside of our control. How do we instill a sense of urgency in young people to care about their financial future? Do the solutions lie in offering discounted and online-accessible financial advice to entice Millennials to patron? Should financial professionals invite their clients to bring their children to their meetings or into the bank to assist them?
I am unsure what the future may bring or what the solution may be. However, I definitely believe that, as financial professionals, we should take a step back and be more patient with the Millennials that actually do want and ask for our assistance and encourage them to keep coming back.
To learn how effective client communication can benefit your business, click here.