New research conducted by the University of Arizona reveals that teens are mistrustful of the nation’s banks, and perhaps even hostile toward the banking system and what they see as Wall Street corruption. Analysts believe this may have serious implications for the future of banking as fewer teens decide to save in banks once they grow up. Survey statistics show that while most teens appreciate the benefit of learning about banks, most believe they are only interested in gaining profit through hidden fees. A majority also believe that credit card companies lure people into taking on more debt than they can manage and that business try to “trick” teens into spending more than they should. For more on this continue reading the following article from The Street.
American teens are not only mistrustful of major financial institutions, they’re actually growing resentful, and that could affect the long-term savings habits and bottom line of U.S. banks and investment firms for a long time to come.
The data come from the University of Arizona’s "Take Charge America Institute for Consumer Financial Education and Research," which says its mission is "to create research-based educational outreach programs to improve financial literacy and help consumers to make informed financial choices in today’s complex markets."
The group says it’s been working on the financial literacy of America’s youth since the institute was founded in 2003. But what it’s been finding lately has less to do with literacy and more to do with full-blown resentment against America’s financial institutions.
In a study released last week, institute researchers conclude that American teenagers were especially shaken by the financial crisis of 2008 and 2009 and to a large extent still are today. After seeing parents struggle with layoffs, high debt and mortgage payments that are becoming more and more difficult to meet, teenagers clearly lay the blame at the feet of "banks, credit unions, credit card companies, businesses and investment institutions," the poll says.
"This poll is extremely revealing," notes Dr. Michael Staten, a professor at the University of Arizona and director of the institute. "In addition to students’ lack of knowledge about the building blocks of personal finance, which we have seen for years in these types of surveys, it shows the next generation of American consumers now also actively distrusts many of the pillars of the financial services industry."
Staten says the study data indicate that younger Americans have largely disregarded the need for understanding how money and finance work, and now that lack of knowledge is really sharpening their ire toward banks and financial services companies. Not knowing how banking and investment firms operate seems to add to the hostility young Americans evidently hold toward the money management industry.
The good news, Staten says, is that teenagers are starting to recognize the importance of learning more about money — and how it works.
"Despite their strong suspicion of financial institutions, these students responded that they believe education is important to their futures and that financial success can be achieved with the right financial decisions," he adds. "This is a hopeful sign and it tells us that more financial education is needed. It may not yet be too late to defuse this sense of cynicism about all things financial, and to prepare these young consumers for the financial choices they will face in adulthood."
Still, the University of Arizona data show that younger Americans’ attitudes toward financial firms don’t differ too much from those of the rest of the population:
- The majority of students who responded to the survey (60%) believe credit card companies often entice people into taking on more debt than they can handle.
- More than 70% of students believe businesses often try to "trick young people" into spending more than they should.
- Only a bit more than 25% of students disagreed with the following statement: "The stock market is rigged mostly to benefit greedy Wall Street bankers."
- Only 15% of students are aware that credit unions are different than banks with respect to their not-for-profit status.
- Fewer than one in five students who responded to the survey (17%) disagreed with the statement, "Banks are mostly interested in getting my money through hidden fees."
Clearly, the younger generation holds a serious grudge toward Wall Street in general, and banks and credit card firms in particular. But financial services firms only have themselves to blame, and will have to reach out to tomorrow’s consumers to earn their trust and their business.
"This isn’t just about bad PR for the financial services industry," says Dan Iannicola Jr., chief executive of The Financial Literacy Group, which conducted the study for the University of Arizona. "Adolescents with this level of distrust of financial institutions become adults who don’t open bank accounts, invest for retirement, insure against risks or finance important purchases like college educations or homes. This type of financial disengagement could push a generation of consumers away from mainstream institutions and toward risky alternative service providers or toward simple inactivity, which has its own perils."
This article was republished with permission from The Street.