SPRINGFIELD, Mass., June 18, 2018 /PRNewswire/ -- Do you think you know the basics when it comes to finances? According to a new nationwide survey released today by Massachusetts Mutual Life Insurance Company (MassMutual), millennials still have a lot to learn about fundamental personal finance topics such as credit scores, compound interest and investing.
Americans age 25-40 were asked five basic financial literacy questions from the MassMutual Foundation's FutureSmart Digital program, developed for middle and high school students in partnership with education technology leader EverFi. Only 17 percent of respondents answered all five questions correctly.
This lack of financial knowledge appears to be taking a toll on American's financial health. According to MassMutual's Financial Security Study, debt is generally the biggest financial issue that middle class families face, especially among younger workers; 55 percent of people don't feel they have the financial knowledge to properly manage their finances.
"The survey results underscore that many young adults lack the basic financial knowledge needed to make informed choices and there is a critical and growing need for youth financial education," said Dennis Duquette, President of the MassMutual Foundation. "The FutureSmart program reaches children during a pivotal time when they are establishing lifelong habits so they can achieve the financial well-being needed to build a more promising and secure future."
Launched in 2015, the FutureSmart Digital program is a free financial education program for middle and high school students across the U.S. that provides an interactive and fun user experience. Users make choices related to real-life scenarios to achieve important goals around saving, job planning, and budgeting. Through the program, the MassMutual Foundation recently reached one million students – halfway to its goal of providing two million students with financial education by 2020.
Students' financial knowledge increased by an average of 67 percent after the completion of the program, based on pre- and post-assessment data collected in the 2016-2017 academic year and 25 percent of students who hadn't previously talked to their parents about finances reported that they were discussing financial topics covered in the course. According to a MassMutual poll conducted this month by PSB online of 500 U.S. parents who have a child who graduated college in the past year, nearly three-quarters (72 percent) wish they had taught their child more about finances.
Parents can start these conversations around financial education early to reach children during their formative years. Since today's youth is a generation of digital natives— mobile apps serve as a great tool for teaching kids and young adults the basic building blocks of financial literacy. The FutureSmart app complements the digital curriculum offered in schools by taking the lessons and transforming them into a simulation that introduces players to a new life stage and the financial decisions that are relevant to that age. It's available in English and Spanish at no cost to anyone with a smartphone or tablet.
Specific findings of the 2018 MassMutual Financial Literacy survey:
- When deciding how to invest your money, which of the following is LEAST important to know? o Whether or not deposits can be made online; *51 percent answered correctlyo When you will need to use the moneyo How risky the investment iso The expected rate of return on your investmento Don't know
- What factor has the biggest impact on a credit score? o Your history of making payments on time; *52 percent answered correctlyo The amount of money you owe on your credit cardso The number of years that you have used credit responsiblyo Having a variety of types of credito Don't know
- If you opened a new savings account, which of the following accounts will grow your money the most? o Account 1: Interest rate 2%, interest compounded daily; *55 percent answered correctlyo Account 3: Interest rate 2%, interest compounded monthlyo Account 2: Interest rate 1%, interest compounded dailyo Account 4: Interest rate 1%, interest compounded annuallyo Don't know
- What is the best strategy to avoid paying interest on your credit cards?o Pay the full balance each month; *78 percent answered correctlyo Pay the minimum balance each montho Make payments onlineo Have credit cards from two different bankso Don't know
- Which one of these is NOT a successful budgeting strategy? o Pay with a credit card if you have a hard time sticking to a budget; *79 percent answered correctlyo Keep some extra money in your budget for emergencieso Revisit your budget regularly and make adjustmentso Think about which items are your most important needso Don't know
PSB conducted the MassMutual Financial Literacy Omnibus survey on behalf of MassMutual. The survey was conducted May 2018 via an online survey among 500 Americans age 25-40.
MassMutual is a leading mutual life insurance company that is run for the benefit of its members and participating policyowners. MassMutual offers a wide range of financial products and services, including life insurance, disability income insurance, long term care insurance, annuities, retirement plans and other employee benefits. For more information, visit www.massmutual.com.
About the MassMutual Foundation
The MassMutual Foundation strives to broaden economic opportunity for America's youth and their families by investing in financial education for middle and high school students across the United States and economic development and education locally in Springfield, Mass. The Foundation is a reflection of MassMutual's longstanding dedication to corporate citizenship and its unwavering commitment to the communities in which we do business. To learn more about the MassMutual Foundation please visit www.massmutual.com/responsibility.
Chelsea Haraty, MassMutual