Common financial terms show young people are ignorant when it comes to money
Do you know what “net worth” is? What about what HELOC stands for? Do you even have an understanding of your 401k?
GoBankingRates.com surveyed hundreds of Americans across the nation, and some of the biggest financial offenders were young millennials, 18-24 years of age, as almost half of them don’t know what a 401(k) is. Twenty-two percent in this age group think “HELOC” is a made-up term.
It’s no secret Americans aren’t great with money management and their corresponding terms. No state in the union can get an A when it comes to financial literacy, and most of them can barely make an average grade. Due to our lack of learning basic money skills early on in life, it’s no wonder that we aren’t prepared for finances when we’re old enough to manage them.
According to the survey, 43 percent of 18-24-year-olds couldn’t identify what a 401(k) is. Savings, especially long-term, may not actually be the most important aspect of work to millennials. Last year, 3 percent of bosses said income mattered most to millennials.
If young people aren’t interested in making money, how will they be interested in saving it? Well, they aren’t.
With stagnant wages (and salary not being a top priority), millennials can’t imagine ever hitting the million-dollar savings mark by the time they are retired or of retirement age. In that Wells Fargo survey from August, less than half had a 401(k) plan in place, which is on par with the GoBankingRates.com figures. If nearly half don’t know what a 401(k) is, how can they contribute to it?
Along with savings, millennials don’t know what the three major credit bureaus are. In fact, 66 percent of them thought the major credit bureaus were banks (Bank of America, Wells Fargo, Chase) or credit companies (Visa, Mastercard, American Express). Less than 30 percent could answer correctly. (It’s TransUnion, Equifax, and Experian, for those wondering.)
A lot of millennials don’t know what a bank CD is, either. Most respondents in the GoBankingRates.com survey answered this correctly — 68 percent — by saying it was a Certificate of Deposit. When broken down by age, however, only 36 percent of young people answered this correctly, while 80 percent of Americans 45 years of age and older got it right.
Most of us know our money terms
The good news is that two-thirds of Americans in general know basic financial terms and concepts. The bad news is that there is another one-third of us that don’t.
While 43 percent of millennials couldn’t identify a 401(k), it’s not far off from the overall total, as 37 percent of Americans couldn’t describe it accurately.
The one problem a lot of respondents had was when it came to net worth. This had only a slight majority of correct answers, with 59 percent saying net worth is the “value of someone’s assets minus their liabilities.”
Millennials had the hardest time trying to answer this question (56 percent) followed by 45-54-year-olds (55 percent). It was 35-44-year-olds and boomers that had the most success answering this question.
The definition of HELOC also posed a big problem among most Americans, as 59 percent got this one right as well. Overall, 22 percent believe HELOC is not a real thing — the second-most popular answer. It is, in fact, real, standing for “home equity line of credit.”
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Article last modified on December 29, 2017. Published by Debt.com, LLC . Mobile users may also access the AMP Version: Most Young Millennials Don’t Know What a 401(k) Is - AMP.