A revealing new study from FirstHome IQ has exposed a troubling gap in the financial education of America’s younger generations, highlighting how this deficit is creating significant barriers to homeownership and long-term wealth building. The findings suggest that the vast majority of Millennials and Generation Z are navigating one of life’s most important financial decisions—purchasing a home—without the foundational knowledge necessary to do so confidently and effectively.
An Educational System Failure
The FirstHome IQ report’s most striking finding centers on the near-complete absence of financial literacy education in American schools. According to the study, an overwhelming 93 percent of Millennial and Gen Z respondents reported never receiving formal financial education during their academic years. This statistic reveals a systemic failure in educational priorities, where students may graduate with knowledge of advanced calculus or literary analysis but lack understanding of fundamental concepts like budgeting, credit management, or mortgage qualification requirements.
This educational void hasn’t occurred by accident. Financial literacy has historically been treated as a supplementary topic rather than a core component of curricula. While some states have begun implementing personal finance requirements in recent years, the FirstHome IQ data demonstrates that these efforts have come too late for current Millennials and much of Gen Z, leaving these cohorts to navigate complex financial landscapes without proper preparation.
The consequences extend far beyond individual inconvenience. When young adults lack basic financial knowledge, they’re more susceptible to predatory lending practices, more likely to make costly mistakes, and less equipped to take advantage of legitimate opportunities that could improve their financial situations. The absence of financial education doesn’t just leave students unprepared—it actively disadvantages them in an economy where financial savvy increasingly determines economic outcomes.
Critical Knowledge Gaps in Homebuying
The FirstHome IQ study identified specific areas where knowledge deficits prove particularly problematic. Perhaps most concerning is the finding that only 7 percent of respondents correctly understood minimum down payment requirements for home purchases. This means that 93 percent of young adults harbor misconceptions about one of the most fundamental aspects of homebuying.
This particular knowledge gap carries enormous practical implications. Many young adults believe they must accumulate a 20 percent down payment before they can realistically consider homeownership. While a 20 percent down payment does eliminate the need for private mortgage insurance and can result in better loan terms, numerous programs accept far lower down payments. Federal Housing Administration (FHA) loans, for instance, accept down payments as low as 3.5 percent for qualified borrowers. Veterans Affairs (VA) loans offer zero-down-payment options for eligible veterans and active-duty service members. Various state and local first-time homebuyer programs offer additional down payment assistance and favorable terms.
When young adults don’t understand these options, they may spend years unnecessarily delaying homeownership while attempting to save for down payments they don’t actually need. During these delay periods, they miss opportunities to build equity, benefit from potential home price appreciation, and establish the financial stability that homeownership can provide. They also continue paying rent—money that builds wealth for landlords rather than themselves.
A Crisis of Trust
Beyond knowledge deficits, the FirstHome IQ report uncovered another significant obstacle: a profound trust gap between young potential homebuyers and mortgage lenders. The study found that only 20 percent of Millennials and Gen Z respondents expressed trust in lending institutions. This means four out of five young adults approach the homebuying process with skepticism toward the very entities they’ll need to partner with to secure financing.
This distrust isn’t entirely unfounded. Millennials came of age during or immediately after the 2008 financial crisis, which was precipitated in large part by irresponsible lending practices and financial industry misconduct. Many witnessed their parents lose homes to foreclosure, saw neighborhoods devastated by the housing collapse, and absorbed messages about financial institutions prioritizing profits over customers’ wellbeing. Gen Z, while younger during the crisis, grew up in its aftermath and inherited similar skepticism about financial institutions.
However, this lack of trust creates a problematic feedback loop. Young adults who distrust lenders may avoid seeking information from these institutions, even when loan officers could provide valuable guidance about qualifying for mortgages, understanding different loan products, or accessing first-time homebuyer programs. The distrust may also cause young adults to miss legitimate opportunities or misinterpret neutral financial advice as predatory sales tactics.
The combination of inadequate knowledge and institutional distrust creates a particularly challenging environment. Young adults don’t know what they don’t know, don’t trust the institutions that could educate them, and consequently find themselves paralyzed when facing homebuying decisions.
The Paralysis of Confusion
The FirstHome IQ report emphasizes how inadequate financial education and low institutional trust combine to delay major financial decisions among young adults. This paralysis manifests in various ways: postponing homebuying indefinitely while attempting to “learn more,” making no progress because available information seems contradictory or untrustworthy, or avoiding the topic entirely because it feels overwhelming and anxiety-inducing.
These delays carry real costs. Every year that homeownership is postponed represents missed opportunities for equity building and wealth accumulation. Young adults who could afford to purchase homes continue renting instead, directing monthly housing payments toward building someone else’s wealth rather than their own. Meanwhile, in many markets, home prices continue appreciating, meaning that delayed purchases often result in higher ultimate costs or reduced purchasing power.
The confusion also affects quality of life beyond pure financial considerations. Young adults uncertain about their housing situations may delay other life decisions—like starting families, changing careers, or making long-term community commitments—because they lack the stability and confidence that homeownership can provide.
Bridging Wealth Gaps Through Education
The FirstHome IQ report makes an important connection between financial literacy education and broader wealth inequality. Homeownership has historically served as the primary wealth-building mechanism for American middle-class families, with home equity representing the largest asset for most homeowners. When inadequate education prevents young adults from accessing homeownership, it doesn’t just affect individual financial outcomes—it perpetuates and potentially exacerbates existing wealth disparities.
This connection becomes particularly significant when considering that educational opportunities aren’t distributed equally. Students in well-resourced schools serving affluent communities may receive better financial education, whether through formal instruction or exposure to financially sophisticated adults who can provide informal guidance. Meanwhile, students in underserved communities often receive minimal financial education and may have fewer adult role models who can share homeownership experiences and knowledge.
When young adults from privileged backgrounds enter the housing market better prepared and more confident than their less-privileged peers, the result is a widening wealth gap. Those with better preparation purchase homes earlier, benefit from more years of equity building and appreciation, and establish financial foundations that support additional wealth-building opportunities. Those without adequate preparation delay homeownership, miss years of wealth building, and may struggle to catch up.
The Case for Earlier Education
In response to these findings, the FirstHome IQ report makes a clear recommendation: financial literacy education must begin earlier in students’ academic careers. Waiting until young adults are already navigating real-world financial decisions proves far too late to provide effective preparation.
Early financial literacy education could address the specific gaps identified in the study. Students could learn about different types of mortgage loans and their qualification requirements, down payment options and assistance programs available to first-time buyers, how credit scores impact borrowing capacity and interest rates, the true costs of homeownership beyond monthly mortgage payments, and strategies for saving effectively for down payments and closing costs.
Beyond homebuying specifics, comprehensive financial education would cover broader concepts that support successful financial decision-making: creating and maintaining realistic budgets, understanding how interest rates and compound growth work over time, evaluating trade-offs between different financial options, recognizing warning signs of predatory lending or financial scams, and building credit responsibly.
Building Confidence and Empowerment
Perhaps the most important insight from the FirstHome IQ report is that financial literacy education serves purposes beyond simply conveying information—it builds confidence and empowerment. Young adults who understand financial fundamentals feel equipped to ask informed questions, evaluate advice critically, and make decisions aligned with their goals and values.
This confidence creates positive cycles. Young adults who feel empowered to navigate homebuying processes are more likely to seek appropriate professional guidance, negotiate effectively, and advocate for themselves when dealing with lenders and real estate professionals. They’re also more likely to share knowledge with peers and eventually teach their own children, helping break cycles of financial illiteracy.
Moving Forward
Addressing the crisis revealed by FirstHome IQ requires coordinated action. Educational institutions must prioritize financial literacy as essential rather than optional curriculum. Policymakers can support these efforts through funding and legislative frameworks that mandate comprehensive financial education. Financial institutions, despite current trust deficits, have opportunities to rebuild credibility by providing transparent, accessible educational resources and demonstrating commitment to customers’ long-term financial health rather than short-term profits.
The stakes demand urgent attention. When 93 percent of young adults lack financial education, when only 7 percent understand basic homebuying requirements, and when 80 percent distrust lending institutions, we face more than isolated problems—we confront systemic barriers to wealth building and economic mobility.
By prioritizing financial literacy education and implementing it earlier in students’ lives, we can empower young Americans to make informed decisions, build wealth through homeownership, and achieve financial security. The FirstHome IQ report provides both a warning and a roadmap—the question is whether we’ll act on its findings before another generation enters adulthood unprepared for financial realities.
Acknowledgment: This article was written with the help of AI, which also assisted in research, drafting, editing, and formatting this current version.
