Today’s younger generations have a shockingly low level of financial literacy, and the trend has been growing worse over the past few years, according to a recent report in USA Today.
Sources say that the average person in his or her 20s has a total debt of $45,000, which includes common debts like credit card debt, student loans, and home mortgages.
With such remarkably high levels of debt, it’s little wonder that hundreds of thousands of young Americans choose to file for bankruptcy every year.
Low Levels of Financial Literacy Lead to Rising Debts
The financial picture for young Americans is pretty bleak, and sources suggest that this is a direct result of low financial literacy:
- Financial literacy in high schools. According to the Treasury Department and the Department of Education, which teamed up to survey financial literacy in U.S. high schools, the future does not look bright. The average score on a financial literacy test administered last year was a 69 percent, which would barely qualify as a passing grade in most classes.
- Education gap. Such low levels of financial literacy are no surprise, given the total lack of attention personal finance is given in American high schools. Fewer than half of all states require high school students to take an economics class, and fewer than 20 percent of states make their students take a personal finance class, according to a study from the Council for Economic Education.
- Link between education and lower debt. Not surprisingly, the 13 states that do require their students to take a personal finance have much higher rates of financial literacy. And students who took these courses were much more likely to avoid credit card debt, according to sources.
Youth See Bleak Financial Picture
In addition to the low levels of financial literacy, a bleak economic outlook has also crippled younger Americans’ ability to secure jobs.
The unemployment rate among youth is higher than 12 percent, which is significantly higher than the unemployment rate for most Americans, which is currently hovering around 8 percent.
And this comes at a time when younger Americans desperately need income to pay their debt. The average student in the class of 2010 owes roughly $25,000 in student loan payments, according to The Project on Student Debt.
Moreover, the average person between the ages of 20 and 29 owes almost $2,000 in credit card debt. Many experts claim that poor financial literacy is directly linked to these disturbing levels of debt.