Plan for the future? Financial illiteracy problematic in younger population

Rising credit card and student loan debt, along with a struggles to plan for the future, are byproducts of financial illiteracy in the younger population, according to Alexander Joyce, a national retirement planner.

Joyce believes a “lack of knowledge or interest in financial matters” has contributed to financial woes in the country. Joyce said in a statement family culture early on in life often shapes how people approach finances. Often, adults are forced to teach themselves.

Trish Wilder, a local financial advisor in the Kyle area, said students should have access to basic finance classes in high school, which she said was once offered in the past.

Such courses are coming back in the form of after-school programs, where students learn about business and finance related items.

Jon Albright, financial advisor with Edward Jones Financial in Buda, said Austin Community College received a $1.7 million federal grant to promote student financial literacy.

“We have economic classes where we learn about the federal reserve, inflation and what the Great Depression was,” Albright said. “We learn the history of financial things, but we don’t give great education on how to balance a check book or what’s a mutual fund.”

One aspect of financial illiteracy is planning and saving enough for retirement.

Wilder said younger adults often don’t take advantage of 401K programs offered by their employers, or they might not realize their employer offers a matching contribution toward retirement.

Several factors play a role, including a doubt from the younger population they have money to invest in a retirement account, Wilder said.

For many young people, envisioning retirement isn’t on the forefront of their thought processes, Wilder said.

Albright said Americans don’t save enough toward their retirement plans.

Understanding what is needed for retirement is a critical aspect, Albright said. With higher life expectancies, today’s retirees are realizing it takes more money to retire than it once did.

How much a person should save depends on what their goals are once they retire.

“It varies on how much risk they’re willing to take,” Albright said. “Investments can vary, too.”

Albright said crafting a will isn’t something many young people take part in, either.

“I don’t think anyone likes to face their own mortality,” Albright said. “No one wants to admit we’re not here forever and sometimes we avoid it.”

Rising credit card debt in young people is a sign of financial illiteracy, Joyce said. According to a December 2017 NerdWallet study, the average American household owes roughly $15,000 in credit card debt.

Financial discipline is an approach younger people can take when it comes to managing credit cards, Wilder said.

One issue is Americans often make minimum payments toward credit card debt, which may only go toward paying off interest and not the principle, Wilder said. If a young person must use credit cards, Wilder said ensuring they can pay it off and not to “spend money you don’t have” is important.

Researching grants and scholarship opportunities is also a key aspect in helping curb rising student loan debt, Wilder said.

According to a 2017 Forbes article, roughly $1.3 billion is owned in student loan debt in the United States in 2017, with the average student in the Class of 2016 owing $37,172. As a result, roughly 11.2 percent of student loans fall into delinquency or default.

Crafting a list of necessary and discretionary expenses is one way to help manage student loans, Albright said. However, tracking how one spends one’s money can be a challenge as well.

“Sometimes it’s the emotional decisions we make about money. We make irrational decisions about money,” Albright said. “Trying to get people to do the more logical thing is far easier said than done.”

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