Millennials' financial illiteracy could be "disastrous" for the economy: Study

Lawrence Lewittinn | Yahoo Finance

It may not be a surprise to some, but millennials are engaging in very risky behavior—with their money. A new study conducted by PricewaterhouseCoopers and George Washington University confirmed that millennials have an alarmingly low level of financial literacy, which could have "disastrous" effects on the economy.

“Of the millennials that we surveyed, only 8% answered five out of five questions correctly and 24% answered three correctly,” lamented Steve Barr, partner at PwC.

The study analyzed the financial characteristics of more than 5,500 people born between the early 1980s and the mid-1990s.

Among the other findings, some 30% of millennials have overdrawn their checking accounts, and 42% used “alternative financial services” such as pawnshops, auto title loans, and payday loans. Four out of five millennials have major debts such as student loans.

“We saw all those risky behaviors both with the highly educated and folks that haven't been fortunate enough to get higher education,” said Barr. He warns that the impact could hurt the rest of the country’s financial health.

“Millennials represent 80 million shoppers,” said Barr. “It's very important to the economy that the millennials really get their act together from a financial literacy standpoint.”

Millennials' heavy debt burdens are causing them to compromise their future security. Some 17% of those with a retirement account took loans against it in the past year, while 14% took out a “hardship” withdrawal.

“It's just time to begin to take on the responsibility,” concluded Barr.