What can we learn from Gen Y’s view of money?

Recently, Fidelity released another survey about millennials and money. They found that 47 percent of us are saving for retirement. To me, that stat was really telling about our generation's view of personal finance, and it's not unlike other findings. When TIME wrote about the survey, they reported:

“Transamerica Center for Retirement Studies found that 71% of millennials eligible for a 401(k) plan participate and that 70% of millennials began saving at an average age of 22. By way of comparison, Boomers started saving at an average age of 35.”

It is self-reported data, sure. But it seems hard to deny that there is a heightened, post-recession interest in finance and our economy. We're pushing for every manner of financial education — in schools and on the Internet. Personal finance has become an increasingly popular niche in the blogosphere. Even Paul Allen, co-founder of Microsoft, is involved in the production of movies designed to explain how our economy works. To me, it's harder to believe there wouldn't be some sort of new-found interest in personal finance after the Great Recession.

Another finding from Fidelity's poll people found interesting:

  • When asked whom they trust most for information on money matters, 33 percent of millennials say they trust their parents, but 1 in 4 (23 percent) say they trust no one.

Considering the economic climate, it's no wonder that millennials are skeptical. At my own blog, Brokepedia.com, one reader brought up a point that I hadn't really considered: Our parents' money advice might not apply because they come from a different time. Obviously, there's some financial advice that is standard. Spend less than you earn, for instance, will always be the formula for financial independence. My parents taught me that at a young age, the advice stuck, and it's working.

However, there's stuff my parents couldn't predict. I wanted to save money by going to a community college, for example. But their idea was for me to go to a “real university” — the more prestigious, the better — so they didn't think my choice was very smart. After witnessing my younger brother's massive tuition, though, I think they changed their minds a bit about saving money on college.

Sure, all of these studies on millennials and how they handle money are generalizations. The huge focus on our behavior borders on obsession if you ask me. Until recently, that focus has been pretty negative. But more studies and surveys are showing that Gen. Y is actually better with money than they're given credit for.

Even if you take the stats with a grain of salt, I think there are a couple of lessons we can learn from the data.

It's okay to be skeptical

For their study, Fidelity asked me if I'd like to produce a man-on-the-street video for them. It involved talking to people my age about money issues. The conversations I had with people closely mirrored Fidelity's findings.

Most of the people I talked to said their parents gave them basic advice and they appreciated it, but there's some stuff they've simply had to learn on their own. Because of the aftermath of the housing crisis and now the student loan crisis, young people seem to be skeptical of what other people tell them to do with their money.

That's not a bad thing.

Separate from the video, I talked to a recent college grad about money. She complained about her massive student debt. What really bugged her about it was that most of it wasn't necessary. Her student loan company approved her for $100,000. She told them she didn't need that much.

“But they told me, ‘No, it's fine. You're approved, it doesn't matter. You can just spend it.' I was 18,” she told me. “Someone gives you $100,000 at 18, all you can think about is all the stuff you can buy. I learned my lesson.”

To me, this is a microcosm of why our generation, as a whole, has learned to be more careful, and yes, maybe even more skeptical, about financial advice.

In the man-on-the-street interviews, I asked the subjects where they got their money advice. Again, the response was mostly, “I learned on my own.” And this is going to make me sound like the worst money snob, but when they told me they were learning “on their own,” I assumed that meant they didn't actually know anything. I was wrong. (Sorry, interviewees.)

We talked about personal finance books I didn't think anyone outside of my money nerd friends would recognize. We talked about investing and homeownership and how your money mind-set changes as you get older.

One 26-year-old, on his way to lunch with a friend, said something that sounded like it came straight from the pages of this blog:

Now Me wants to have fun, but Future Me wants to have fun, too.”

It seems like Gen. Y is learning through a filter of skepticism — but they are learning. Our economy is changing, we're recovering from our mistakes, and we want to make sure our moves are steady and well-calculated.

Learning to adapt

Millennials have been criticized for postponing families, not buying property, moving back in with our parents and even commuting.

I've done three out of four of those things, and they contributed immensely to my financial security. Moving back in with my mom was the last damn thing I wanted to do at 22. We were going through a rough time. And, of course, I wanted my freedom. But I saw it as an opportunity to get my finances in order, and, thankfully, my mom welcomed me. I didn't think it was selfish, and she didn't think it was selfish. In fact, she suggested it as a smart money move.

The economy sucks. The system sucks. Stuff needs to change. But in the meantime, millennials seem to be adapting and taking control of what they can — and that's a good thing. To me, the way people are challenging traditional measures of success is an indication that we're adapting. Yes, that might mean moving back in with your parents for a while so you can build an emergency fund. It might mean that you decide that renting is okay, because you don't want to be house-poor.

We should try to make the bigger picture better; but in the meantime, it's productive to work toward improving our own personal financial situation.

What do you think about the (generalized) financial habits of Gen. Y? Obviously, there's room for improvement. While we might be surprised at the finding that 47 percent of millennials are saving for retirement, it's also a concern that 53 percent are not saving.

Still, sometimes it seems like the stuff we get criticized for is the stuff we're doing right. The headlines point out our flaws — but, to me, skepticism is healthy. And so is adapting.

I stand by the fact that I think there's a shift toward financial security. It might not be any more attainable than it was (probably even less so). But it seems like more people, young and old, are interested in what it takes to recover from an economic crapstorm. After coming of age in the middle of that crapstorm, is it so hard to believe that millennials might be interested in developing better financial habits than previous generations?

More about...Planning, Retirement

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Mr. Frugalwoods
Mr. Frugalwoods
5 years ago

I definitely think the Great Recession has impacted the millennial generation’s view of money. I’d call it “Saving and Cynicism”.

In my office we have a higher percentage of 20 somethings participating our our 401k plan than 30 somethings! Bad news for Gen X.

I do see my fellow millennials falling prey to rampant consumerism though. I wonder if the economic recovery is going to quickly erase the rational saving instinct? When folks felt like the economy was shaky they were more likely to save for a rainy day. Without the impending doom, can they keep it up?

Beth
Beth
5 years ago

I don’t think Gen Y is any wiser than any other generation, but then I’m very skeptical about surveys conducted by companies that sell financial products. I’m also wary of reports that pit one generation against another — ever heard of Gen X? I do think there is often as much variation among a group as there is between groups, and it is very difficult to make generalizations. Also, these types of surveys tend to demonstrate self-attribution bias, especially since they’re self-reported. For instance, perhaps many boomers didn’t save for retirement because they had pensions. And many boomer women didn’t… Read more »

Matt
Matt
5 years ago

As GenX or GenY or millenials, or whatever you call us, we are dependent on ourselves for our retirements. The current state of underfunded social security is unsustainable. My personal share of the national debt is more than my mortgage.

Nobody that I know under the age of 35 thinks that social security, or any other government benefit program, will be around in any meaningful fashion 40 years from now.

Our generation has to learn to save and invest, because the previous generation is broke and took out massive loans in our names.

Cookster
Cookster
5 years ago
Reply to  Matt

Interesting, Matt. I am 65 and I agree that Social Security will be gone for me also.

Mike
Mike
5 years ago
Reply to  Matt

Social Security isn’t underfunded. The funds are there, in the form of I.O.U.s, bonds, stolen by the government to use. They should have never been general purpose funds. The people that want to change SS to reduce benefits for future retirees are going to get skewered as so many of them are paying into the system now. Imagine how the “lockbox” theme was laughed at so much. Nobody over 65 will have reduced benefits atleast not in the next 20 years, I can’t imagine that happening. The buck if anything, as it was has with everything, will be rolled to… Read more »

Kristen
Kristen
5 years ago
Reply to  Mike

The whole tax code doesn’t need to be restructured. You could completely solve the Social Security problem with ONE fix – remove the cap on taxed earnings for Social Security. For 2014, any income received over $117K is no longer taxed for social security. If high earners had to pay the same overall percentage as everyone else, the gap would evaporate. For the sake of rounding, let’s say withholding is 6%. As the law stands now, someone earning 75K in wages pays in the 6% to SS. But someone earning double that pays a smaller percentage of their wages as… Read more »

BD
BD
5 years ago
Reply to  Kristen

That seems like a messed-up idea because of how social security is structured. According to the gov. social security site, there is a cap on how much social security you can get back per month (If you retire at age 70, it’s $3,425. If you retire sooner, it’s less). So, you’re suggesting that we essentially take money from people for a forced retirement plan, and then deny them the chance of ever getting it back for their own retirement, except for a minimal amount? That’s not a fair plan. That’s probably why there’s a cap on taxing income for SS… Read more »

Kristen
Kristen
5 years ago
Reply to  Kristen

I seem to have to reply to myself rather than BD:

Hi, BD – Those are two very different problems: one mathematical, one political. You could Mathematically solve the problem with one fix- removing the cap. We could argue about fairness (I’m fine with removing the cap, and it’s not because we’re low wage earners. We pay a LOT in taxes every year), but that is a belief/political issue rather than a mathematical one. A subject on which it sounds like we would disagree.

Greg
Greg
5 years ago
Reply to  Kristen

Kristen, I agree with you that removing the cap would help ensure that Social Security is better funded; however, there is a structural problem with the system based on a single, large assumption. The system is set up so that current workers pay for current retirees, which assumes that the population of workers will always exceed the population of retirees. However, with medical advances keeping people alive longer, birth rates declining, and xenophobic policies keeping legal immigration rates at a historic low, the current structure isn’t sustainable. Therefore, I suggest raising Social Security tax rates so that they earn in… Read more »

Emily @ Simple Cheap Mom
Emily @ Simple Cheap Mom
5 years ago

Finally a story that didn’t just paint us all as useless!

We have our issues, but so does any generation. Thanks for giving an example of the other side of the coin.

JoeM
JoeM
5 years ago

As a “millenial” (a term I hate, by the way, because of what a wide range of ages it covers), I’ve seen my parents poor financial decisions firsthand and want to avoid the short-sighted decisions they made. I know there’s going to be no golden parachutes or protected pensions for me and I needed a plan for my financial future right when I graduated college. Now I haven’t done things perfectly – I didn’t start realizing my wrongs until about 21-22, so I wasted thousands on student loans (graduated with $34k in debt), but at least I’ve come to terms… Read more »

Kristen
Kristen
5 years ago
Reply to  JoeM

I’m technically “Gen X” and I don’t like that term, either!

getagrip
getagrip
5 years ago

I find it sad that somehow something like moving back in with parents is considered and reported as “new” to the media. When I was a kid plenty of people would move back in with parents to get back on their feet and then move out, often multiple times. People moving back in because of ending of military service, return from college, divorce, coming back from a job out of state, etc. all happened around me growing up. I don’t recall anyone calling them out as “failures” either. It was just family helping family for what made sense to them.… Read more »

Mysticaltyger
Mysticaltyger
5 years ago
Reply to  getagrip

Excellent points, especially the part on pensions. People have a way of viewing the past with rose colored glasses. People got screwed out of pensions in the 50s and 60s ALL THE TIME, often due to long vesting periods. Hence, ERIRSA legislation was passed in 1974 and was amended since. Basically, it outlawed super long vesting periods for pensions….so what did the corporations do? They got rid of them and replaced them with 401ks. Not much has changed between then and now. It’s just there are no illusions now that someone else is going to take care of you, and… Read more »

Kurt @ Money Counselor
Kurt @ Money Counselor
5 years ago

My read is that Gen Y’ers as a group are on a wiser and more prudent financial path than their parents followed. Probably this is driven in part by necessity–student loans are draining cash that might otherwise be spent on cars and mortgages–but I think it’s also partly driven by observing members of the previous generation looking at working full time until their bodies and minds literally give out, due mostly to poor financial decisions and succumbing to Wall Street’s marketing. Gen Y is determined not to repeat these mistakes!

Beth
Beth
5 years ago

How do you know, though?

I’m not trying to be rude — it’s just there doesn’t seem to be any reliable information out there. Lots of self-reported non-scientific surveys and anecdote though.

Marsha
Marsha
5 years ago

“Transamerica Center for Retirement Studies found that 71% of millennials eligible for a 401(k) plan participate and that 70% of millennials began saving at an average age of 22. By way of comparison, Boomers started saving at an average age of 35.” This beginning quote is misleading, since the first 401k wasn’t started until 1981, and didn’t become widely available until many years after that. Many boomers were already in their 30’s before these plans were available. My husband and I are “young” boomers (in our early 50’s) and didn’t have access to 401k’s until 1987 (him) and 1991 (me).… Read more »

Mysticaltyger
Mysticaltyger
5 years ago
Reply to  Marsha

They didn’t have 401ks, but they did have IRAs. I know, I know…no one seems to be able to open up an IRA on their own. I don’t know why people find it so freaking difficult. Drives me crazy.

imelda
imelda
5 years ago
Reply to  Mysticaltyger

But who knew about them?

James Salmons
James Salmons
5 years ago

There is a worn out, overused phrase, that I hesitate to repeat except for the fact that it expresses exactly what I thought as I read your post: “From your mouth to God’s ears.”

For many years I have helped to promote the positive results you relate. I certainly hope that they are indeed beginning to take hold.

Sarah
Sarah
5 years ago

My husband and I are both 26. We got married at 23, had a child by 24 paid off our $50,000 combined student loan 3 years after graduating. Now our net worth is currently $30,000. We save an approximately $2000.00 a month on top of our retirement fund at work which is $1100/month. But we live in my mom’s basement which we pay $600/month all in. We don’t go out as much as our peers, we try to do things that are free (library/parks), our car is 11 years old and paid off and we live on a budget. Currently,… Read more »

Riss
Riss
5 years ago
Reply to  Sarah

I’m totally with you. People have different ideas about what ‘living life’ means. I find so much joy in being with people I love, spending time in nature, making things or cooking or growing things that I end up not having to buy. Instead of going to concerts for $200 to see somebody else play, I’m just as happy to get together with friends to play our own music. I’ve seen the stress and heartache that happens when people fall behind financially and have to worry how they will make ends meet or keep their homes. Financial security might seem… Read more »

Millionaires Giving Money
Millionaires Giving Money
5 years ago

After the crisis of 2008 I started saving avidly, the thought of financial meltdown still remains in my psyche and every penny I save puts a smile on my face and every penny I spend is scrutinised. I think generation Y will be a very successful bunch and will hopefully lay the foundation for proper personal finances for the generations to come. Thanks for the informative post Kirsten.

patrick
patrick
5 years ago

Grossly generalizing about peoples’ behavior based on a date range of when they were born is an absolute media creation and a joke.

Do you wished to be defined by when you were born?

I am tight with my money. My daughters are tight with their money. Why? Because they learned from me how to be tight with money.

How you are about money is often closely related to how your parents were and how they were raised.

Emma | iHELP Student Loans
Emma | iHELP Student Loans
5 years ago

It’s unfair to blame a generation that was majorly impacted by the great recession. I think young people today are doing the best they can. No one wants to be financially dependent.

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