Contrary to belief that young people aren’t money-conscientious, a 2011 Hearts & Wallets study of over 4,500 households nationwide found that many – as much as 45% – of, Gen Yers (ages 18-29) carry no debt, are smart savers, and own real estate. Millennials also are the most intensive users of exchange-trade funds (EFT’s) of any age group.
The study found 45% of Gen Y holds no debt and accrued more households without debt than Gen X and younger boomers. Gen Yers’ real estate represents 73% of net worth – a higher allocation than other life-stages (48% of net worth), and lower debt than older investors.
“Gen Y is traditional in their goals. They want a home, a college education for their children, financial security and no debt – and many of them appear willing to work very hard to attain these things,” said Chris Brown, Hearts & Wallets principal, in an April news release. “That differs from the stereotype of a bunch of spoiled brats who want to be handed everything. There are capable and motivated individuals in Gen Y who are smart investors. Their preferences and behaviors will shape the future. Firms who continue to ignore younger investors do so at their peril. New and existing competitors who embrace these changes will thrive.”
Where many Gen Yers trip up is long-term and retirement planning. The study found that 45% sought help for at least one financial task and 7 out of 10 plan to increase savings but require support to execute. Also, only half of Gen Y sent savings to employer-sponsored retirement plans – 34% currently allocate funds to an employer-sponsored retirement plan.
In the fourth annual retirement income management survey by Hearts & Wallets, findings showed the importance of marketing and/or developing retirement income offerings increased in importance by 39% in two years. In 2012, 77% of firms rated retirement income as vitally or very important to strategic planning initiatives over the next one to three years, compared to 57% in 2010.
“As the scope and offerings of retirement income expand, advisors will be supported with more training and smart tools. And firms are finally beginning to devote more resources to young and mass market investors,” added Laura Varas, Hearts & Wallets principal, in the same release.