Here’s the problem: Many millennials are saddled with student loan debt and don’t have the income to pay it back. This is the case with so many, in fact, that our generation has been labeled “financially fragile” by the Global Financial Literacy Excellence Center, the world’s leading financial literacy research and policy center at George Washington University.
Millennials overwhelmingly carry debt, use alternative financial services like pawnshops and payday loans and are not saving for their retirement. Fueling this fire even more is the lack of fundamental financial education at any school level. When asked to take a basic financial test, the GFLEC found that only 24 percent of the 5,500 millennial participants demonstrated basic financial literacy, and only eight percent demonstrated high financial literacy.
This data suggests a systemic chasm in our preparation for real-world financial issues and is considered to be a major cause of millennials’ heedless spending and saving habits. And since many millennials cannot afford professional help in managing their finances, they’re left fending for themselves in unknown territory.
While receiving a solid education on personal finance is a rarity, some organizations are going above and beyond to provide students with the tools they need to become financially literate. I recently sat down with Dev Parikh (Miami University ’16) who worked on-campus at the First Miami Student and Alumni Federal Credit Union for four years. We discussed how the organization is tackling the financial literacy problem that exists among millennials.
This interview has been edited for brevity and clarity.
So would you like to begin by maybe telling us a little bit about what the Credit Union does.
“Sure! It’s kind of like a normal bank but it’s catered towards student and alumni. They offer loans, checking and savings accounts, shared house accounts, and more, so basically the same services as a bank but with a narrower audience.”
So if it’s essentially like a bank, what would be the advantages of investing with the Credit Union instead of a larger bank?
“[With the Credit Union] there is more personal interaction, because it exists in such a concentrated market, and the rates are more affordable. You can get a loan without a credit score. The Credit Union’s main goal is to get people lines of credit at affordable rates. We know that student loans are probably the first loans many students will have to handle on their own, and we want to help them with that process in any way possible.”
There is a major problem among millennials right now regarding their lack of financial literacy. Does the Credit Union do anything specifically to tackle this issue?
“Yeah, so the Credit Union holds seminars about personal finance multiple times a year that any student can attend. They also have a partnership with professors at Miami who teach personal finance classes or are available for personal finance questions. Another way they like to get involved is to have a lot of students intern with them so they can get hands-on experience with managing money and a real-world look at what happens at banks.”
It seems like the Credit Union offers a lot for students in the way of more formalized education, which is great. Is there anything they do to teach students more subtle lessons like the benefits of saving, managing a budget, etc. that will help them later in life?
“Absolutely. The Credit Union tries to follow up with customers’ monthly statements and stresses keeping track of monthly expenses. We alert the customers if we notice anything unusual in the statement in the way of expenses or whatever [sic], and having that interaction with the customer to kind of let them know where there is room for their accounts to grow or where they should simply try to maintain stability with their expenses is definitely a benefit the Credit Union offers that a normal bank couldn’t. Following up with them frequently is a great way to teach our customers how saving or budgeting can really help them month by month, so eventually they develop good habits that will continue to help them throughout their lives.”
As a millennial, what do you think we can do to improve our financial literacy?
“I took a personal finance class here, and I think it should be one of those classes that most business if not all students are required to take. It taught me how to do things like manage a budget, save for retirement, and file tax returns, and I think that students need these skills. Even business students need a personal class, because I think they would benefit from learning about business at a personal level, since we learn at such a high level that I think it would be helpful to have a more personal connection to the things we study by learning how to manage our own finances before we talk about managing a corporation’s.”
While getting ahead of your finances can be tricky, there are resources available for the proactive. As Parikh pointed out, the Credit Union at Miami University knows that student loans and small checking accounts are most students’ first exposure to real banking, and therefore offer many financial education opportunities for students.
Find out if your university has its own student credit union and drop by for a visit.
Many of the financial struggles millennials face could be eliminated with education that teaches them the skills to manage a budget, save for retirement and plan for emergency expenses. Therefore, it is imperative that we remain proactive, and seek out financial education through organizations like the First Miami Student and Alumni Federal Credit Union who work to overcome the financial literacy problem among millennials.
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