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Millennials and Money

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Millennials and Money

Millennials and Money

Arguably the most significant transition the world faces is a demographic sea change. The Baby Boomers are retiring and the Millennials (born 1981-2000) are taking the baton and running.

This group is the largest North American generation in history, and we’ve talked about their investing and money habits before. Today’s infographic is based on looking at over 100 surveys of Millennials in 2014, and it reveals a great deal about their habits in personal finance.

Probably the most staggering figure, in our opinion, is that Millennials have a different attitude towards debt than previous generations. This is likely a result of growing up through the Financial Crisis, and also seeing their parents and countries take on unprecedented amounts of debt. It turns out that 63% of Millennials do not have a credit card, and do not want one. This is almost twice the amount (35%) of adults over 30 years old. There is other mistrust in the old financial guard, as 71% of Millennials would rather “go to the dentist, than listen to what banks are saying”.

Not surprisingly, some other results: Millennials are willing to spend more to go green than other generations (56% vs. 34%), Millennials want a job that makes a big social impact in contrast to employed people over 35 years old (35% vs. 19%), and Millennials believe social media and word of mouth much more than television, magazine, or online advertisements.

What Millennials want will slowly turn the investing world upside down in many categories. Any service marketed towards this group will likely be profoundly impacted, so it is an area worth watching for investors.

Original graphic from: Consolidated Credit

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Personal Finance

Mapped: Personal Finance Education Requirements, by State

Only 22.7% of U.S. students are required to take a personal finance course. Which states have the highest levels of personal finance education?

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The Percentage of Students Receiving Personal Finance Education

When you graduated from high school, did you know how to create a budget? Did you have an understanding of what stocks and bonds were? Did you know how to do your own taxes?

For many Americans, the answer to these questions is probably a “no”. Only 22.7% of U.S. high school students are guaranteed to receive a personal finance education. While this is up from 16.4% in 2018, this still represents a small fraction of students.

This graphic uses data from Next Gen Personal Finance (NGPF) to show the percentage of high school students required to take a personal finance course by state.

A Closer Look at State-level Personal Finance Education

A standalone personal finance course was defined as a course that was at least one semester, which is equivalent to 60 consecutive instructional hours. Here’s the percentage of students in each state who have a required (not optional) personal finance course.

State/Territory% of Students Required to Take Personal Finance Course
Mississippi100.0%
Missouri100.0%
Virginia100.0%
Tennessee99.7%
Alabama99.6%
Utah99.6%
Iowa91.3%
North Carolina89.2%
Oklahoma47.1%
New Jersey43.0%
Nebraska42.8%
Kansas40.8%
Wyoming38.3%
Arkansas34.6%
Wisconsin33.5%
South Dakota27.1%
Ohio23.5%
Pennsylvania16.2%
Maine15.6%
Rhode Island14.8%
Connecticut14.7%
Illinois13.9%
Maryland12.5%
North Dakota12.2%
Vermont12.1%
Nevada11.0%
Indiana10.9%
Oregon7.5%
Minnesota6.9%
Montana6.9%
New Hampshire6.0%
Kentucky5.5%
Colorado5.4%
Delaware5.0%
Massachusetts5.0%
West Virginia3.2%
Louisiana2.7%
Washington2.4%
Texas2.2%
New York2.0%
Michigan1.7%
Idaho1.4%
Arizona1.0%
California0.8%
South Carolina0.8%
Alaska0.6%
Florida0.4%
New Mexico0.4%
Georgia0.0%
Hawaii0.0%
Washington, D.C.0.0%

Eight states currently have state-wide requirements for a personal finance course: Alabama, Mississippi, Missouri, Iowa, North Carolina, Tennessee, Utah, and Virginia. Naturally, the level of personal finance education is highest in these states.

Five states have begun the process of implementing a requirement, with Florida being the most populous state yet to guarantee personal finance education for high schoolers. The state previously required schools to offer a personal finance course as an elective, but only 5% of students took the course.

Outside of the guarantee states, only 9.3% of students are required to take a personal finance course. That number drops to 5% for schools that have a high percentage of Black or Brown students, while students eligible for a free or reduced lunch program (i.e. lower income students) also hover at the 5% number.

Why is Personal Financial Education Important?

The majority of Americans believe parents are responsible for teaching their children about personal finance. However, nearly a third of parents say they never talk to their children about finances. Personal finance education at school is one way to help fill that gap.

People who have received a financial education tend to have a higher level of financial literacy. In turn, this can lead to people being less likely to face financial difficulties.

Chart showing that people with low financial literacy are more likely to face financial difficulties, such as being unable to cover an unexpected $2,000 expense, compared to people with high financial literacy

People with low levels of financial literacy were five times more likely to be unable to cover one month of living expenses, when compared to people with high financial literacy. Separate research has found that implementing a state mandate for personal finance education led to improved credit scores and reduced delinquency rates.

Not only that, financial education can play a key role in building wealth. One survey found that only one-third of millionaires averaged a six-figure income over the course of their career. Instead of relying on high salaries, the success of most millionaires came from employing basic personal finance principles: investing early and consistently, avoiding credit card debt, and spending carefully using tools like budgets and coupons.

Expanding Access to Financial Education

Once the in-progress state requirements have been fully implemented, more than a third of U.S. high school students will have guaranteed access to a personal finance course. Momentum is expanding beyond guarantee states, too. There are 48 personal finance bills pending in 18 states according to NGPF’s financial education bill tracker.

Importantly, 88% of surveyed adults support personal finance education mandates—and most wish they had also been required to take a personal finance course themselves.

When we ask the next generation of graduates if they understand how to build a budget, it’s more likely that they will confidently say “yes”.

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Personal Finance

Ranked: The Best and Worst Pension Plans, by Country

Which countries are best equipped to support their elderly citizens? This graphic compares pension plans around the world.

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Pension Plans

The Best and Worst Pension Plans Worldwide

Each year, millions of people around the world leave the workforce to retire.

But as the global population grows older, and the COVID-19 pandemic accelerates the already rising number of retirees, there is still a large degree of variance in the quality of public pension plans around the world.

Which countries have invested in robust public pension programs, and which lag behind?

This graphic, using 2021 data from Mercer CFA Institute Global Pension Index, compares retirement income systems worldwide.

How the Index Ranks Pension Plans

Because a country’s pension system is unique to its particular economic and historical context, it’s difficult to draw direct comparisons. However, there are certain elements that pension experts see as universally positive, and that lead to better financial support for older citizens.

As with previous rankings, Mercer and the CFA Institute organized these universal elements into three sub-indexes:

  • Adequacy: The base-level of income, as well as the design of a region’s private pension system.
  • Sustainability: The state pension age, the level of advanced funding from the government, and the level of government debt.
  • Integrity: Regulations and governance put in place to protect plan members.

These three measures were used to rank the pension system of 43 different countries, representing more than 65% of the world’s population. This year’s iteration of the index notably includes four new countries—Iceland, Taiwan, UAE, and Uruguay.

The Full Ranking

When it comes to the best pension plans across the globe, Iceland, the Netherlands, and Denmark have the top three systems.

CountryOverall ValueAdequacySustainabilityIntegrity
🇦🇷 Argentina41.552.727.743.0
🇦🇺 Australia75.067.475.786.3
🇦🇹 Austria53.065.323.574.5
🇧🇪 Belgium64.574.936.387.4
🇧🇷 Brazil54.771.224.171.2
🇨🇦 Canada69.869.065.776.7
🇨🇱 Chile67.057.668.879.3
🇨🇳 China55.162.643.559.4
🇨🇴 Colombia58.462.046.269.8
🇩🇰 Denmark82.081.183.581.4
🇫🇮 Finland73.371.461.593.1
🇫🇷 France60.579.141.856.8
🇩🇪 Germany67.979.345.481.2
🇭🇰 Hong Kong61.855.151.187.7
🇮🇸 Iceland84.282.784.686.0
🇮🇳 India43.333.541.861.0
🇮🇩 Indonesia50.444.743.669.2
🇮🇪 Ireland68.378.047.482.1
🇮🇱 Israel77.173.676.183.9
🇮🇹 Italy53.468.221.374.9
🇯🇵 Japan49.852.937.561.9
🇰🇷 Korea48.343.452.750.0
🇲🇾 Malaysia59.650.657.576.8
🇲🇽 Mexico49.047.354.743.8
🇳🇱 Netherlands83.582.381.687.9
🇳🇿 New Zealand67.461.862.583.2
🇳🇴 Norway75.281.257.490.2
🇵🇪 Peru55.058.844.264.1
🇵🇭 Philippines42.738.952.535.0
🇵🇱 Poland55.260.941.365.6
🇸🇦 Saudi Arabia58.161.750.962.5
🇸🇬 Singapore70.773.559.881.5
🇿🇦 South Africa53.644.346.578.5
🇪🇸 Spain58.672.928.178.3
🇸🇪 Sweden72.967.873.780.0
🇨🇭 Switzerland70.065.467.281.3
🇹🇼 Taiwan51.840.851.969.3
🇹🇭 Thailand40.635.240.050.0
🇹🇷 Turkey45.847.728.666.7
🇦🇪 UAE59.659.750.272.6
🇬🇧 UK71.673.959.884.4
🇺🇾 Uruguay60.762.149.274.4
🇺🇲 U.S.61.460.963.659.2
Average61.062.251.772.1

Iceland’s system ranks high across all three sub-indexes. The country offers a state pension with two components: mandatory contributions from both employees and employers, and optional contributions to state-approved pension products.

Its system has a high contribution rate, which ultimately results in a generous state pension that retirees in Iceland can tap into. The country also has a relatively low gender pension gap, meaning the difference between the average female pension versus male pension is relatively small—especially compared to other OECD countries.

gender gap pensions oecd

On the opposite end of the spectrum, the Philippines, Argentina, and Thailand scored the lowest on the ranking.

Thailand scores particularly low in the adequacy category, with a score of 35.2. To increase its score, Thailand could increase the minimum payments for its poorest demographic and include more employees in occupational pension schemes.

Recommendations for Better Pension Plans

According to the index, countries seem to be steadily improving their pension systems. From 2020 to 2021, the average score of the overall index increased by 1.0.

With an average of 60.7, the index shows that most countries’ systems have some good features, but they also have some significant shortcomings that could be addressed by the following recommendations:

  • Boosting adequacy by increasing coverage, and including more employees in private pensions systems.
  • Increasing sustainability by adjusting retirement pension age to reflect increasing life expectancy, and promoting higher workforce participation from older citizens.
  • Raise integrity by introducing policies that reduce the gender pension gap and discrepancies amongst minorities.

Countries that implement even a few of these changes could make a huge difference for their next generation of retirees—and those that don’t could be in trouble in the near future.

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