Washington, June 3 (IANS) Knowledge or awareness of financial matters, even in the aftermath of the global financial crisis, is still low among young adults, according to a study conducted in the US.
The study says only 27 percent of people aged 23-28 years can answer three basic questions about interest rates, inflation, risk diversification and other basic financial concepts.
Furthermore, this result was amplified after studying the answers of young women, African-Americans, and Hispanics, and those with low educational attainment.
The results were compiled from a national study, and were consistent with the findings from the Financial Capability Survey, the results of which were released last December by Treasury Secretary Tim Geithner and Education Secretary Arne Duncan.
The research, headed by Annamaria Lusardi, research associate at the National Bureau of Economic Research, shows that financial literacy is largely influenced by parental education levels and financial habits.
Lusardi analysed financial literacy questions based on knowledge of simple concepts, such as the capacity to do a two-percent calculation, and the workings of inflation and risk diversification.
She pointed out: ‘In today’s demanding financial environment, young people represent a powerful consumer group. They must make complicated financial decisions at an early age, and financial mistakes made early in life can be costly.’
‘Student loan or credit card debt can have a devastating long-term impact on quality of life and career choice,’ Lusardi added.
Young people who are financially literate are more likely to have college educated parents (in particular, college educated mothers).
For instance, a college-educated young male, whose parents had stocks and retirement savings when the respondent was 12-17 years old, was about 45 percent more likely to know about risk diversification than a female with less than a high school education and whose parents were not wealthy, said an National Bureau of Economic Research release.
The findings were published in the Journal of Consumer Affairs.
