Financial Literacy for Youth: Why it Matters

Jun 06, 2023

by United Way NCA

In 2023, many young people will enter adulthood without the essential financial knowledge and skills they need to make informed choices about their money.

Consider this: Young Americans owe over $1 trillion in debt, and 70% of millennials live paycheck to paycheck. These alarming statistics highlight an urgent need for financial education among young people. Early-adulthood financial decisions can have lifelong consequences. Equipping young people with the tools to manage their money effectively helps them avoid the cycle of debt and economic insecurity that plagues many Americans well into adulthood, giving them the foundation to build a secure financial future.

United Way National Capital Area (United Way NCA) recognizes financial literacy’s vital role in expanding economic opportunity in our community. United Way NCA’s five Financial Empowerment Centers across DC, Maryland and Virginia provide access to high-quality financial services and guidance—at no cost—to individuals and families of all ages to assist them in creating economic stability. Delve into a personal story of a single mother who utilized our financial empowerment centers to empower herself and her family today. We are specifically focused on the economic opportunity of our region’s ALICE population. ALICE—Asset Limited, Income Constrained, Employed—represents the nearly 500,000 community members in the National Capital Area who are employed and earn more than the Federal Poverty Level, but still struggle to make ends meet.

What is Financial Literacy?

Financial literacy is the combined knowledge and skills required to make responsible and informed financial decisions that contribute to a sense of financial security and well-being.

Knowledge of financial concepts like saving, investing, spending and borrowing is the foundation of financial literacy. In addition, understanding credit management, asset building and how to reduce debt and avoid scams is critical to a healthy financial life.

The Repercussions of Low Financial Literacy

Why is financial literacy important? Because low financial literacy threatens the well-being of individuals and families, especially in underserved and low-income communities. Without a solid financial foundation, our youth are more susceptible to predatory lending and costly errors in managing debts and expenses that can lead to lifelong financial inequity.

Additionally, low financial literacy can lead to missed wealth-building opportunities and reduced access to higher education and professional development training. When young people lack the financial knowledge they need to make informed decisions, they are more likely to become trapped in cycles of poverty and debt. For example, poor spending and borrowing habits often result in low credit scores, contributing to higher financial insecurity.

Investing in financial literacy helps bridge the opportunity gap that exists in our underserved communities and empowers youth with the tools they need to break down economic barriers and lead financially secure lives.

The Financial Literacy Gap

According to a July 2022 FINRA Foundation national financial capability study, a persistent financial literacy gap exists in the U.S. Further, the study found that young people, Black/African American, Hispanic/Latino and low-income households remain more vulnerable to the consequences of low financial literacy than other Americans.

The study also showed that the above groups were more likely to exhibit psychological symptoms of financial stress, and younger people were 38% more likely to miss mortgage payments and 26% more likely to make hardship withdrawals from retirement accounts.

These findings highlight the importance of investing in financial education and access to services to help individuals and families build assets and gain economic opportunity. This is especially true for younger people across all demographics.

Financial Literacy: The First Step Toward Financial Capability

Financial education is fundamental to improving financial health and well-being for our communities, but developing financial capability is the ultimate goal. Financial capability is what happens when financial literacy knowledge is practiced and applied until it becomes second nature and drives behavior that consistently leads to positive economic outcomes.

It gives individuals the confidence to make informed financial decisions, take advantage of opportunities and build financial security for themselves and their families.


United Way NCA seeks to improve the lives of underserved individuals in our community by increasing economic opportunity for individuals and families across our region.

Our Financial Empowerment Centers teach fundamentals of budgeting, saving, investing, borrowing responsibly and other personal finance topics useful in everyday life and long-term financial planning.

Empowered with the knowledge and skills required to make responsible financial decisions, individuals will build the financial stability necessary for a successful future.

United Way NCA Financial Empowerment Centers provide financial services and expert guidance at no cost in a welcoming, supportive and inclusive environment. Our goal is to be a trusted resource for individuals and families in the communities we serve. For support around credit building, debt management, saving, starting a business, homebuying or completing your taxes, contact a United Way NCA Financial Empowerment Center near you. When none are ignored, all will thrive.

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