When the CYouth team began researching in preparation for the CYouth Web Series, I was struck by a reoccurring theme: “Gen Y does not understand finance.” The thought revisited me recently while watching a commercial for Confessions of a Shopaholic when a man asks the lead character, “Did you just type ‘What is Finance?’ into Google?”
The thought of “googling finance” struck me as endemic to the Gen Y population for two reasons: first, it reinforces, or reiterates, Gen Y’s lack of financial knowledge; second, it highlights Gen Y’s lack of awareness of more “legitimate” forms of education on the topic.
But all of this begs the most fundamental question of, “Why?” Why is just Gen Y so ill prepared on the subject of personal finance? Because the two sources Gen Y typically relies on for education are not prepared to teach personal finance: parents and schools.
Parents as Financial Mentors
My parents’ generation lived through their fair share of economic hardship: the recession of the early 80s, the S&L Crisis, stagflation, the energy crisis, and the economic strain of the Vietnam War. “Thrift” was still considered a “value.” Larger families stretched household budgets. It was still common to see only one parent working.
From this generation came two general trends that pertain to our discussion, parents who learned from their upbringings and those who didn’t. Little needs to be said about “those who didn’t.” We don’t need to look much further than the origins of the current recession.
What about the financially savvy parents? Here is a parental phrase commonly heard by Gen Y’ers: “I want to make sure that you have all of the opportunities that I didn’t have.” It is a noble philosophy that has allowed many of my generation to flourish in educational, professional, and personal endeavors that were not available to our parents. However, the flip side to this is—compared to our parents—Gen Y has not had to confront the same level of (financial) limitation, which contributes to both the idealism and naïveté attributed to our generation.
How do I teach my child about finance when I am struggling with my finances? How do I teach my children financial restraint and responsibility without limiting their potential? When confronted by questions like these, it comes as little surprise to learn that 74% of today’s parents feel unprepared to teach their children about finance.
Financial Education in Schools
While in school, I encountered personal financial education twice, and only twice. The first time was in my seventh grade Family and Consumer Sciences class (Home Economics); I learned how to write a check. A year later, I learned how to calculate simple and compound interest. When I was 13, I did not need to write checks, nor did I need to calculate simple versus compound interest.
When students are finally old enough to appreciate or use a financial education, they are at an age where schools have to focus on the R’s: reading, ‘riting, and ‘rithmatic. Also throw in calculus, statistics, music, chemistry, physics, philosophy, sociology, history, civics, and more. Personal finance does not raise test scores, and it does not help students get into the best colleges. It is understandable why personal finance gets nixed.
In her recent interview with CYouth, the President of the Consumer Federation of America Irene Leech offered another reason why many schools are dodging financial education: “Personal finances deal with values, and [many believe] educators have no business being involved in it.”
Only seven states require students to take any personal finance class to graduate. While there is a fair amount of debate taking place in the other 43, the subject remains absent from many classrooms.
So there we are
The two sources that Gen Y should rely on for education currently are shying away from the responsibility. There are certainly exceptions to all of these trends, but what you have is a starting point, a push in the right direction.
CYouth’s purpose is not to blame, or to absolve Gen Y of their responsibility to be proactive in their personal financial education. Our purpose is to discover the reasons behind the gaps in Gen Y’s financial education. The other CYouth members and I grew up with this generation, we know this: it’s important to know how to spend money, saving is good regardless of whether or not we do it, and we should strive for good credit. Many of us are striving to improve, but clearly we need help.
So you are a credit union, and you’d like to get involved in the financial education of Gen Y, you have three options: 1) give parents resources they can use to teach their children, 2) work schools and teachers to set up classes, 3) act on your own. The most comprehensive educational plan will incorporate all three! Now, doesn’t that sound much better than just googling?