As I understand it, Gen Y includes those folks who were born from 1978-1994 (according to the Wikipedia entry on Gen Y) or 1979-1994 (according to a BusinessWeek article on Gen Y), or maybe just 1977-1988 (based on the back cover of The Generation Y Money Book, by Don Silver).
The definition of Gen Y is the least of its concerns. Gen Y seems to be all over the news, blogs, and other media regarding their treatment of money and career. Are they bad with money, insufficiently serious about their careers, spoiled, and unrealistic? Are they attentive to money, conscientious and community-oriented, and just unlucky to be saddled with skyrocketing costs of education and healthcare?
I’m not a member of Gen Y (under any definition, though don’t think I didn’t try to find a source that would allow me to redefine myself as a 20-something). But all the buzz about Gen Y piques my curiosity.
What is the deal with Gen Y and money?
Simple enough question, right? So I did some digging, and here are some simple enough answers.
Gen Y is terrible with money.
- “They’re called Generation Broke by the media.” (The Money Book for the Young, Fabulous, and Broke, by Suze Orman (inside cover flap).)
- “20- and 30-somethings are in a financial mess. Is it because we're dumb, arrogant or simply uneducated?” (“Why Generation Y is Broke,” at MSN Money (tagline to article).)
- Their median credit-card debt is $8,200, and they make up a disproportionate amount of U.S. bankruptcies. (“Why Generation Y is Broke,” at MSN Money.)
- They live in Peter Pan’s Never Never Land by living with their parents, relying on their parents for financial help generally, and otherwise refusing to grow up. (“Narcissists in Neverland,” at Newsweek.)
- Only 31% of those working already contribute to their 401(k) plan. (“Youth Is Wasted on the Generation Y Investor,” at NYTimes (citing Hewitt Associates study).)
- They “haven’t a clue on how to allocate their funds”—on average putting 35% of their investments into fixed-income options like bond funds and stable-value funds, meaning they are investing more conservatively than their parents. (“Youth Is Wasted on the Generation Y Investor,” at NYTimes (citing Hewitt Associates study).)
Gen Y is great with money.
- “They have financial smarts.” (“Generation Y: They’ve arrived at work with a new attitude,” at USAToday.)
- 37% (total) and 46% (of those already working) expect to start saving for retirement before age 25. (“Generation Y: They’ve arrived at work with a new attitude,” at USAToday (citing Diversified Investment Advisors survey).)
- 70% of those working already contribute to their 401(k) plan. (“Generation Y: They’ve arrived at work with a new attitude,” at USAToday (citing Diversified Investment Advisors survey).)
Gen Y doesn’t care about money.
- They would “overwhelmingly rather ‘pursue their passions’ than ‘make lots of money.’” (“Narcissists in Neverland,” at Newsweek (citing Manpower study).)
- They place a higher value on “self fulfillment.” (“Generation Y: They’ve arrived at work with a new attitude,” at USAToday.)
Gen Y cares a lot about money.
- 81% say that getting rich is their most-important or second-most-important life goal. (“Generation Y’s goal? Wealth and fame,” at USAToday (citing Pew Research Center poll of 18-25 year olds).)
- 74.5% say it is "essential" or "very important" to be "very well off financially" (“Generation Y’s goal? Wealth and fame,” at USAToday (citing Higher Education Research Institute survey of college freshmen at the University of California-Los Angeles—noting this figure is rising and was 41.9% in 1967).)
- They view education as “a passport to greater earning potential.” ("Why do most students go to college? To get a job and earn more money," at Young Money (citing University of Phoenix study).)
- They are less interested in “developing a meaningful philosophy of life” (“Generation Y’s goal? Wealth and fame,” at USAToday (citing Higher Education Research Institute surveys, showing 85.8% of respondents showing interest in that in 1967 and only 45% in 2005).)
Gen Y doesn’t want to work as much.
- They want to work less and care a lot about “work life balance.” (“Generation Y: They’ve arrived at work with a new attitude,” at USAToday.)
Gen Y is working a lot.
- They (the teenagers) are working more than their parents did (as teenagers)—averaging 17 hours a week compared to their parents’ 8-10. (“Generation Y Savings,” at CNNMoney.)
- They work through college—with 70% working while in school at an average 23 hours a week, and with 30% working more than 30 hours a week. ("Why do most students go to college? To get a job and earn more money," at Young Money (citing University of Phoenix study).)
Gen Y doesn’t like to talk about money.
- 1 in 5 would rather visit the dentist than discuss long-term financial planning. (“Generation Y Money Fears” at Young Money (citing Nationwide survey).)
- 1 in 8 would rather have a colonoscopy than discuss estate planning. (“Generation Y Money Fears” at Young Money (citing Nationwide survey).)
Gen Y is open about money.
- They’re “open” with and “happy” to discuss their finances with each other. (“Gen Y more open with money talk,” at The Daily Telegraph.)
Phew! Glad we got that all cleared up. One of my favorites was: 31% or 70% of working Gen Y is contributing to 401(k). Really gives me a lot of confidence in surveys.
Why all the contradictions—or perhaps paradoxes? To some degree, I think it really doesn’t matter. Part of me thinks the desire to categorize people into neat little boxes just relates to marketing—marketing personal-finance books and products specifically to women, marketing personal-finance books and products specifically to young people—and specifically to baby boomers, specifically to Gen X, and now specifically to Gen Y. If you’re a member of Gen Y and have your financial house in order, great. If you don’t, and it’s useful to look at personal-finance books or blogs or other products aimed at Gen Y, great. (In addition to the Silver and Orman books mentioned above, I noticed, for your possible reference: Generation Debt: Take Control of Your Money--A How-to Guide, by Carmen Wong and Generation Debt: How Our Future Was Sold Out for Student Loans, Bad Jobs, No Benefits, and Tax Cuts for Rich Geezers--And How to Fight Back, by Anya Kamanetz.)
Maybe the way in which they approach personal finance speaks to you.
Maybe it doesn't.
What do you think of Gen Y and money—whether you are Gen Y or just see them on TV? Bad rap, good rap, accurate rap,…?
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I'm a Gen Y (78) and I admit to not being raised to 'know' my money. I'm getting better though. =)
I don't know what to think about Gen Y and money. I'm 24 and I have several friends close to my age with credit card debt and lifestyles that exceed their income. I have other friends who basically have their stuff together. (And I'm in between).
I think a LOT is made of 20-somethings who rack up $50k in credit card debt, have staggering student loans, and squander their pay on shoes and Starbucks lattes. I hear and read about this so often that I am not even sure what is typical for people my own age anymore.
My own personal pain is that thanks to my (moderate) student loans and high rental costs, it's probably going to take about another 20 years until I can afford to buy a place to live. I worry that I am stupid for faithfully throwing money into my 401(k) plan only to see it decline by 10% because I put into stocks because I'm young and that's supposedly what young people should do. Is that typical for someone my age to worry about? I have no clue.
CastoCreations, Kathy,
Thanks for the comments!
Kathy,
I think what you're describing is common -- or at least, I can report that I remember feeling that way during the first few years of first starting to put money in a 401(k). I remember reacting to that a few times along the way, at one point reducing my 401(k) contributions and at one point changing some of my contributions to be heavier in bonds, because I was tired of seeing the down market seemingly reduce my 401(k) portfolio. For me, at least, it evened out as I became more comfortable with investing and with the stock market (and started to get a better sense overall with what I wanted to do with financial planning). I expect that many of the paper losses that I was looking at have since come back around and even become gains. Now I'm happy to say that I don't look at the market tickers very often and feel quite comfortable riding through the current market. It helps to have now watched my 401(k) grow over the years, despite the ups and downs. I'm not sure if that's any consolation?
I can certainly tell you, in my humble and non-professional opinion, that I think you're being smart -- not stupid -- for continuing to contribute to your 401(k) (and to be in stocks), especially at your age.
Is there a tension between your goals of saving for retirement and saving for a house?
Thanks for your reply :)
I think a lot of my worries about my 401(k) are because I only set the thing up about a year and a few months ago, and it's been going down for what seems like a good portion of that time.
Your response did make me feel a little better - I think I do need to see my investments go up a little bit before I can entirely trust the whole retirement savings thing.
I think gen-Ys have more challenges than earlier generations in terms of personal finance because everything just costs so much more. I'm almost 25 so I and most of my friends are Gen-Y. I think I agree with what Kathy said, some of us are good with money and some of us are horrible. I think it is also sort of unfair to judge Gen-Y right now when most of us are in our twenties and in a period of transition. Most of us just got more money than we have ever seen in our lives and we're trying to manage it. That's how I feel anyway. It doesn't matter what year or generation it is, the years between 20 to 30 is a pretty confusing time for personal finance. When we're all forty something we will probably be more responsible just due to age.
Ugh, you are so right--surveys make me laugh, too.
In my small corner of the world, my friends in their 20s do and don't talk about money, so I suppose these survey results are right. Some tell me everything; some tell me nothing specific.
As for me, I've decided to blog to the PF world... anonymously.
Thanks for the comments, everyone!
Part of what I find so interesting about all this is not only the contradictory reports about Gen Y -- it's also whether Gen Y really is that much different than other generations. I'm sure they have their particular qualities and idiosyncrasies. But lots of what your comments mention remind me of my twenties.
I remember thinking about how much more expensive it was to buy a house at that time and how much more student-loan debt I had, relative to some of my older colleagues at work. I remember being generally confused about and somewhat inattentive to personal finance and having thoughts about my 401(k) similar to Kathy's. So I think I agree with Baglady that some of these "issues" with Gen Y are just issues of an age range more than of a generation.
I'm a Gen Y [86] and I think my generation is worse at managing money than Gen-X-ers and Boomers, but it's not entirely their fault. For example, Baby Boomers could afford their college if they worked a part-time (or a full time?) job while taking classes. With skyrocketing tuition costs, it's just not like that anymore, and nearly everybody has to take student loans. The government's solution - the Pell Grant (which requires you to fill out a _very_ complex form) is a joke, since it can't give more than $4,500 per year. ($2,250 per semester)
Then there are credit cards with their shameless on-campus solicitors (apply for a card and get a T-shirt! yay!) and colleges encouraging their students to get them. While I personally think credit cards are good if you use them correctly, I'm well aware that most of my peers aren't as responsible. Public schools aren't helping much, either - all they teach is how to balance your checkbook (who carries checkbooks these days, anyway?)...
I'm part of Gen Y ('83) and I wish I could settle this debate. I know most of my college friends are managing their money quite well. Most, if not all, are contributing to retirement accounts.
I don't think there is any excuse, with the amount of information and financial blogs and websites, for Gen Y to have money management issues. We are the information generation, if we want to know something, we Google it. If we need help with PF, we should be finding it.
We do have much higher student loans than other past generations, but there is no excuse to have loads credit card debt and a negative savings rate.
Thanks for the comments!
I do think Gen Y has certain challenges -- but I am curious how to compare to other intergenerational trends. For instance, did Gen X have higher student loans than the Baby Boomers -- and how does the relative increase there compare to the difference between Gen X and Gen Y?
But at the end of the day, I agree that there's no excuse for folks not to pay attention to their personal finances -- Gen Y or any other generation!
I think this sounds about right. I am smart and diligent about money, but also lazy and stupid. I know a lot of others who may be even more lazy and prob. more stupid. Then a couple spoiled, but as for the ones making it on there own I might go as far to say that we may not think stocks will even exisit in the future or as much trust in set-up 401k type things. I think we may even have/or had the brains to go big in that but all the working has us physically and mentally broke down. Could just be speaking for me. Unless you are making big money already, you don't feel you can even put the effort into these things. Others are just trying to get by. I am actually one of the few in my age that just seems to not overspend and never gave into the credit card thing, so am able to pay my own medical bills, if something needed to be done to my vehicle or actually buy something off credit if needed or wanted. It could all turn for the worse quickly with minor lifestyle changes. It would of course be good to change it for the better. In a way I see some 'investments' such as real estate as evil..only aiding to inflation rates and cost of living..or a scam in that now everyone must be a professional investor or in trust in them in order to survive or retire. Maybe i should set myself up as a stock and people could invest in me more.
Well, maybe i'm just one of the lucky ones, I'm still hanging on to my 20's (only 5 months left *sob*).
But in any case, this past decade i've swung from being strung out on cc's chasing tail, to md with a kid and a *V* good job, contributing to a 401 and with a pension...
Maybe i'm just lucky to be blessed with sage parents (yeah, i cant believe i'm saying it either) but they came from the very bottom - one from the bronx during the depression, the other from the dustbowl of the plains (Literally one from each era - yes my folks are O.L.D.) They taught me the value of the dollar, of saving for the rough times, and to LIVE WITHIN MY MEANS - it's really sunk in now that i'm a daddy too...
who knows - maybe i'm just an anomoly, but i'd put money on the fact that these surveyors dont really know how to survey such a diverse group of individuals.
I fit into the category of those who don't want to work much, and because of that I'm good with my money. I save about half of my income because I know that's the only way I'm going to be able to quit work and still be young enough to enjoy it. I don't want to be rich. Just $1 mil would be enough to live a meager lifestyle and not have to work again. I'm 22 and I have $20,000 saved so far.
Some things you should know about Gen Y:
We're coming into a world where starting salaries are lower with fewer and more costly benefits, and where cost of living has skyrocketed. We're coming into a world where we need more education to get the same jobs, where we pay several times more to get the same education, and where we start our lives after college with tens of thousands of dollars in debt.
Some people in my generation have responded to these financial pressures by becoming very, very savvy. Others I think are just overwhelmed. At any rate, the dichotomy shouldn't be that surprising, and neither should the attempts by others to pigeonhole a younger generation.
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