Getting Credit for What You Know: An Analysis of Financial Illiteracy in Young Adults Due to Limited Preparation in Secondary and Higher Education

Debt is at a record high level among young adults ages 18 to 29. Aside from college tuition and prices of other necessary expenditures being on the rise, another causation for the high levels of debt is a majority of young adults do not possess the knowledge or the necessary skill set to manage their own personal finances. Through preliminary research, it was found that twenty-one states in the United States claim to require a personal finance course; however, each personal finance “course requirement” varies on definition and application by state. Only ten states require a one semester non-substitutable (not replaceable with a similar course) personal finance course in order to graduate. In addition to this, no colleges/universities were found to require a personal finance course before the completion of an undergraduate degree program. Since these educational intuitions are deemed responsible for “preparing the youth and young adults for the adult world,” research was conducted to determine how financially literate current young adults are and where the source of their knowledge stems from. A quantitative survey of one-hundred-and-thirty-three anonymous young adults (18-25 years old) was conducted to inquire on confidence levels, knowledge of financial terminology, and the application of that terminology to common life situations. Results showed that individuals were familiar with terminology but not its application. The survey also revealed that young adults are not confident with handling large financial decisions, nor do most young adults practice healthy financial habits (i.e., budgeting). In addition to the survey, personal interviews of ten individuals were conducted in order to evaluate more expansive results. The interviewed participants also did not budget and gave various reasons for it: not necessary, do not have major expenses, and/or have an inconsistent income. In the survey and the interview, it was concluded that young adults primarily give credit to their parents versus formal education in the schools they attended/currently attend for their financial knowledge. Therefore, based on the preliminary research and the survey and interviews conducted, this paper further explains the rationale for and benefits of implementing a non-substitutable personal finance course within secondary and higher educational institutions and challenges associated with doing so.