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Preparing for Their Future: A Look at the Financial State of Gen X and Gen Y

Divided We Fail

Young Americans are faced with new challenges that will affect how they manage their finances and prepare for their long-term financial security. To profile and better understand Generation X and Generation Y's current and future financial situation, the American Savings Education Council (ASEC) and AARP (on behalf of Divided We Fail) commissioned Mathew Greenwald & Associates to conduct a survey with members of these younger generations.

This research shows that:

  • Many young adults have yet to align their actions with their financial values and goals. While 91% report having financial goals for themselves, only 53% report sticking to a monthly budget. And while 62% have given at least some thought to their own retirement, 61% feel their retirement savings is behind schedule. Nevertheless, there is hope that these young adults may change their behavior since they recognize it is a problem: 42% give themselves a grade of D or F to describe how well they are saving.
  • There is a lack of financial sophistication among younger generations. When asked about basic investment concepts, many respondents chose not to even venture a guess. For example, when asked a multiple choice question to estimate a reasonable rate of return that can be expected from a diversified U.S. stock mutual fund over the long run, 41% said they were uncertain. In addition, respondents were more likely to say they are very knowledgeable about their iPod (40%), than about how to file their taxes (26%), buy a home (21%), invest outside of the workplace (15%), or save for retirement (15%).
  • Four out of five young adults report having some type of non-mortgage debt. This includes 63% with credit card debt, 48% with car loans, 31% with student loans, and 27% with medical debt. However, more than three out of five describe their debt obligation as either a minor problem or not a problem at all.
  • Workplace benefits are valued by employed young adults. At least three-quarters of employed young adults say it is important for their employer to provide health insurance, a retirement savings plan, matches or contributions to a retirement savings plan, a wellness plan, and education and/or advice on how to save for retirement.
  • Many young adults feel things are harder for them than previous generations. Roughly half of those surveyed believe it is harder to support a family (54%), save for the long-term (52%), save for a child's college education (50%), and buy a first home (47%) than it was for previous generations.

The online survey of 1,752 Americans ages 19-39 was fielded in January 2008. The data were weighted by age, sex, education and race. For more information, contact Colette Thayer at (202) 434-6294. (59 pages)