With college graduates facing a changing employment landscape, rising student debt and a generation of retiring baby boomers to help support in the years to come, learning to manage personal finances is crucial for young Americans.
Gauging Personal Financial Capability
The seeds of personal financial capability are sowed early in life. Unfortunately, progress in personal finance education has slowed since the mid-2000s, according to the Council for Economic Education's 2014 Survey of the States, which studied K-12 economic and financial education in the United States.
April is National Financial Literacy Month, an opportune time to examine some startling statistics showing a lack of progress in personal financial capability in Memphis and elsewhere in Tennessee.
Credit rating agency TransUnion reported last year that Memphis- area residents have lower credit scores than residents of any other metropolitan area in the nation. Memphis also is one of the most "unbanked" areas in the country, meaning many of its residents don't have traditional bank accounts and may instead rely on costly alternative financial services.
For the state as a whole, 19 percent of Tennesseans who participated in a 2012 study reported spending more in the previous year than their annual income that year and that spending didn't include expenditures on a home, car or other big investment. The study, by the Investor Education Foundation of the Financial Industry Regulatory Authority (FINRA), also found that 60 percent of Tennessee participants did not have a rainy-day fund with enough emergency savings to cover their expenses for three months. FINRA also asked participants five questions on personal finance topics that the average person might encounter in everyday life. Only 38 percent of Tennessee participants could answer more than three correctly. These findings were similar for many other states.
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