Millenials may know their technology, but it does not necessarily help them manage their finances, according to a new TIAA study released Wednesday.

Millennials are not as financially literate as older adults and their financial technology abilities do not improve their personal financial management practices, said the study by the TIAA Institute and the Global Financial Literacy Excellence Center at the George Washington University School of Business.

The study also found a gap between younger and older millennials, with the younger ones being less financially astute.

The "Millennial Financial Literacy and Fin-Tech Use: Who Knows What in the Digital Era" study posed financial questions to 1,007 millennials, people age 18 to 37. Millennials answered 44 percent of questions correctly, compared with all adults, who answered 50 percent of the questions. Moreover, younger millennials, ages 18 to 27, only answered 41 percent of questions correctly, compared to 47 percent of older millennials, ages 28 to 37.

Financial literacy among both older and younger millennials is lowest in the areas of comprehending risk and understanding insurance. Financial literacy is highest in the area of borrowing and debt management, the study said.

The report also examined how millennials use technology to manage their personal finances and the effect of financial technology on financial outcomes. About 80 percent of millennials use their smartphone for transactional purposes like paying bills and depositing checks, and 90 percent use their phones for informational activities like tracking their spending.

While fintech offers a convenient way to manage finances, users do not always make savvy financial decisions, the study said. Almost 30 percent of millennials who use their smartphones to make mobile payments report overdrawing their checking account, compared with 20 percent who do not make mobile payments. Furthermore, one-quarter of those who track spending with their smartphone report overdrawing their accounts, compared with 20 percent of those who do not track spending with their smartphones.

"The low level of financial literacy among millennials speaks to the importance of equipping this large generation with the knowledge and skills that are needed to make financial decisions in the digital era," said Annamaria Lusardi, academic director at George Washington University financial excellence center.

 

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