They are underemployed and burdened with college debt. Gary Mottola is a research director for the Investor Education Foundation. Simon Bruty By Anjelica Tan, Reporter From Kiplinger's Personal Finance, June 2014 Gary Mottola is research director for the Investor Education Foundation of the Financial Industry Regulatory Authority and author of “The Financial Capability of Young Adults,” a study of the millennial generation (people born between 1978 and 1994). The following is an edited transcript of our conversation with him.See Also: Our Special Report for Starting Out KIPLINGER: How has coming of age during the Great Recession affected millennials? MOTTOLA: They face financial challenges that previous generations did not have to face, such as underemployment and tight credit markets. They’re burdened with debt from the rising cost of college, and many of them are struggling to pay for their education while working. These factors in the post-recession economy are a strain on this generation. Our study found that only 40% of them have a retirement account, for example, and just one in four is willing to take investment risk when saving for a rainy day or the future. How do the financial habits of this age group differ from previous generations? Millennials appear to rely on traditional banking much less than any other generation. They are much more likely to use newer forms of payment, such as prepaid debit cards and mobile devices. Nearly half of them, more than any other generation, have used costly forms of non-bank borrowing, such as payday loans and pawn shops, in the past five years. This could be the biggest mistake millennials are making: They may not know that less-expensive options are available. Advertisement You found that millennials exhibit fairly low financial literacy. Why? Only 24% of the young adults in our survey could answer four or five questions correctly on a basic financial literacy quiz. They struggle with the concept of a mortgage, for example. But that’s because not all of them have had the opportunity to buy a house. They also struggle with the concept of inflation because they came of age in an era when inflation was under control. More experience could translate into higher levels of financial literacy. Also, millennials have been offered more financial education through their schools or employers than previous generations, but their participation rate is the lowest among all age groups. How can financial education for this generation be improved? One avenue that might be fruitful is tying education to gaming. Millennials are the most digitally advanced generation. It makes sense to offer them financial education through video games and digital content.