Very often, young clients are under utilizing banking services and paying unnecessary fees. In many cases, individuals that mismanage their bank accounts will have fee after fee charged to their accounts until it dried up. Once their accounts become overdrawn, some will be turned over for collections and lose the ability to have an account with most financial institutions.
These are what the financial institutions call the unbankable. Typically, these customers are reported to agencies such as Chexsystems. Banks have their own policy on how many years it will take to be permitted to re-open an account.
For young consumers, obtaining and managing credit is a large challenge. Young banking clients that mismanaged their credit are likely to lose access to jobs, low interest credit and housing. It is common for young adults to fail during the start of their credit history. For many, having a derogatory bank report is avoidable if they knew how to manage and prepare for financial situations. This type of education taught outside of one’s circle of influencers is called financial literacy.
Topics that are covered in financial literacy include planning, budgeting, credit utilization, credit scoring, savings, investments, taxes and business management. Many banks, government agencies and non-profit institutions play a vital role in conducting financial literacy courses. However, the amount of participants in these workshops are less than 1% of the total low and moderate income population.
Young adults beginning to own financial services are finding new alliances in colleges and vocational schools. Adding courses in personal finance and small business management is a new and practical way to earn school credits. This approach is preparing graduates to manage their financial future. Financial literacy in adult education settings are innovative ways to expand participation. Vocational schools and colleges instruct more adults than all banks, social workers, housing services and financial literacy instructors combined.
Certified Financial Educators are creating meaningful educational content required in financial literacy curriculum for young adults. Educators are delivering lessons with a motivational intent and helping students achieve useful learning outcomes. Unfortunately, not every student gets this type of education. Introducing financial literacy in adult education is challenging for many reasons. For starters, financial literacy instruction is not a common profession. Curriculum content is typically generic and contains information created from a financial institutions point of view.
The challenge of teaching a new generation in money management skills is daunting. For many young adults, the value of money has taken a new meaning. Cultural realities are different even within the same age groups. Financial literacy instructors have a lot to learn themselves in order to teach meaningful lessons.
As a bank manager, I saw the importance of teaching financial skills to young adults. The most successful in building credit, holding investments and responsible money management had guidance.
There is much at stake in this type of education. We have seen what occurs when communities fail to understand the implications of mismanaged finances. Thankfully, instructors and students are learning to communicate common money management values and preventing future disastrous consequences.