Millennials and money: Financial preparedness and money management practices before COVID-19

August 2020

Precarious financial behaviors, coupled with low financial literacy, have left many millennials ill-equipped to face a severe economic crisis.

Summary

In 2018, when the economy was expanding and the economic collapse due to the coronavirus pandemic was still a long way off, most millennials were already stressed about and struggling with their personal finances. This report sheds light on the factors contributing to millennials’ financial fragility, with an eye toward helping them prepare for current and future economic challenges.

Key Insights

Only 19 percent of millennials who perceived themselves as having high knowledge about personal finance correctly answered basic questions assessing fundamental financial concepts.

In 2018, 63% of millennials felt anxious about their financial situation and more than half lacked an emergency fund to cover three months’ expenses.

Millennials carry large volumes of mortgage and student loan debt, and 44% feel they have too much debt.

43% of millennials report using some form of alternative financial services (such as payday loans and pawn shops).

Thirty-seven percent of millennials are financially fragile (defined as not being able, or likely not being able, to come up with $2,000 in 30 days).

Methodology

The report’s findings are based on data from the National Financial Capability Study (NFCS), a triennial survey that provides a baseline measure of American adults’ financial capability. The NFCS is nationally representative and includes more than 27,000 observations, allowing for rigorous analysis of population subgroups such as millennials (defined here as adults age 18–37).