Young adults may be lacking basic financial literacy

Survey from University of Illinois highlights risks ahead

Young adults may be lacking basic financial literacy

The upcoming cohort of adults is facing financial disaster by lacking a basic understanding of good financial management.

A study by a University of Illinois graduate found that just 22% of 18-to-24-year-olds were deemed to be financially stable. Nearly a third of those studied were deemed to be “financially precarious” with poor financial literacy and income stability.

More than a third of the young adults studied had suffered a significant and unexpected drop in income in the past 12 months, had no savings with which to pay their living expenses for three months if needed, and said they lacked the resources to come up with $2,000 in the event of an emergency.

"They lacked access to mainstream financial institutions, they were frequent users of alternative financial services, which tend to charge high interest rates and fees," said Guarav Sinha, the report’s lead author.

Even those who were deemed financially stable lacked confidence in their financial literacy, Sinha added.

"It is concerning that many young people are entering adulthood without adequate financial capabilities to ensure their future well-being and that of their children."

The full study is to be published in the Children and Youth Services Review.