We are living in the most connected era of human history. Nearly everyone has access to all the information they could ever want or need on the internet via smart phones or laptops. Despite this, there is still a significant need for greater financial literacy among today’s adults.
Look at the P-Fin Index, for example. An annual barometer of financial literacy among U.S. adults, the index includes 28 questions that examine eight functional areas of financial knowledge, including borrowing and saving. The 2023 survey found that, on average, U.S. adults correctly answered only 48% of the study’s index questions and that Gen Z, followed by Gen Y (often referred to as millennials) performed worst, answering only 38% and 45% of questions correctly respectively.
With the average age of a first-time homebuyer falling squarely in the millennial age range, according to the National Association of REALTORS (NAR), loan officers have to be prepared to fill the gaps in their first-time home buyers’ financial knowledge.
Why It Matters
Greater financial literacy is, understandably, linked to greater financial well-being. In the 2023 P-Fin study, respondents with a very high level of financial literacy consistently had better financial well-being than respondents with a very low level of financial literacy. In fact, those with a very low level of financial literacy were found to be more than four times as likely to have difficulty making ends meet, nearly three times as likely to be debt constrained, and more than four times as likely to lack emergency savings sufficient to cover one month of living expenses. With greater financial literacy and greater financial well-being, homebuyers are better positioned for sustainable homeownership.