Millennials and money: Financial preparedness and money management practices before COVID-19
Andrea Bolognesi, Andrea Hasler, and Annamaria Lusardi
Abstract: Millennials (individuals age 18–37 in 2018) are the largest, most highly educated, and most diverse generation in U.S. history, and they are already playing a pivotal role in society by making up the largest share of the work force. Consequently, their financial decisions promise to greatly affect the future of the U.S. economy. Millennials were deeply affected by the Great Recession of 2008 and have been disproportionately affected by the steadily rising costs of higher education and the ensuing student loan debt crisis. This generation now faces an additional economic crisis, resulting from the shutdowns due to the COVID-19 pandemic. In light of this, we assess in this paper the financial situation, money management practices, and financial literacy of millennials to understand both how their financial behavior changed over the ten years following the Great Recession and the situation they were in on the cusp of the current economic crisis (in 2018). Findings from the National Financial Capability Study (NFCS) show that millennials tend to rely heavily on debt, engage frequently in expensive short- and long-term money management, and display shockingly low levels of financial literacy. Moreover, student loan burden and expensive financial decision making increased significantly from 2009 to 2018 among young adults. Given these findings, we suggest that financial education programs tailored to the needs of young workers could play a crucial role in supporting financial decision making and helping them build financial resilience. Thus, we provide recommendations to employers who want to implement financial wellness programs targeted to their millennial employees. Effective workplace financial wellness programs include financial checkups, accessible and customized content, and cover a broad range of personal finance topics. A financially strong and healthy workforce provides the foundation for empowered and resilient communities.