New research reveals most students lack financial literacy
Photo by George Pak
A recent study by Auburn University in Alabama of 31,000 full-time undergraduate students reveals that most lack basic financial knowledge. The "Financial Literacy and Student Debt: Survey of College Students"study examined the link between student debt and financial literacy. With the rising costs of higher education, more students rely on loans, resulting in significant debt. The study found that many young adults are financially burdened and performed poorly on a six-question financial literacy test.
The findings were disheartening. Less than 15% of students answered all six questions correctly, and less than half scored at least four correct answers. Additionally, the study revealed that students with more financial need did worse on the test. Those with no student loans got an average of 3.1 questions correct, while those with loans averaged 2.6 correct answers. Business studies students, who might be expected to do better, only answered 3.0 questions correctly on average, while non-business students got 2.2 questions right.
What’s the annual cost of a higher education in 2024?
Considering how much post-secondary education costs and the considerable debt that many students and families shoulder, this lack of basic financial knowledge is alarming.
Similar findings in Canada
In Canada, a similar study by Edward Jones Canada found that many recent high school graduates felt unprepared to manage their finances. Nearly all Canadians (95%) believe that the current economic climate makes financial education more important than ever. However, less than half (46%) felt they had enough knowledge to manage their finances after graduating high school. Young Canadians (aged 18 to 34) were among the least likely to feel prepared, with only 40% agreeing they had the required knowledge. Overall, most Canadians (80%) believe that the best place to learn about financial literacy is in the classroom.
Where do credit unions come in?
Credit unions have a unique opportunity to address this gap in financial knowledge. As active leaders in their communities, credit unions can leverage their mandate to empower and improve the financial well-being of their members. Partnering with financial literacy program providers like Currency Marketing, they can offer education programs tailored to young members. These programs should cover a wide range of financial topics, be available both in-class and online, integrate seamlessly with local school curricula and, above all, be engaging and fun.
It's good business for everyone
By teaching young people how to manage money and make smart financial decisions, credit unions can help set them on a path to financial success. In turn, credit unions benefit by fostering more financially savvy members, which also makes them more profitable.
Check out It’s a Money Thing. In particular, the student loans module, Student Loans 101 – a breakdown of the differences between federal and private student loans, and areas to consider before taking out a student loan.
Also check out how Credit Union of America, of Wichita, Kansas, uses It’s a Money Thing, when working with local schools to help improve student financial literacy here.
Tim McAlpine is the Founder & CEO of Currency Marketing. He is best known for developing the It's a Money Thing Financial Education Program that credit unions from around North America are using to connect with new young adult members. He is also a driving force behind CUES Emerge, an emerging leader program that combines online learning, peer collaboration and an exciting competition component.
