With age comes wisdom, but so does debt. According to research by LIMRA, few Gen X and Gen Y investors believe they’re very knowledgeable about making financial decisions — though more than twice as many of them who have an advisor say they’re more confident.
While people get smarter about finances as they get older, they also take on greater financial obligations. With more young people starting a family later than their parents, which means more opportunity to save, few are taking advantage — suggesting that these generations could greatly benefit from targeted financial education.
According to statistics from the Federal Reserve, Gen Xer’s have $3 trillion in savings, with 43% in retirement savings (almost all in DC plans or IRAs); Gen Yer's has $229 billion. Both groups are failing to save enough for their age, with an average deferral rate of 6%, LIMRA says. Furthermore, younger workers are more likely to be auto-enrolled and thus don’t have to make any decisions about their DC plans — which can stunt their financial literacy. Those who contribute to their DC plan feel more knowledgeable, but then, those who are more knowledgeable are more likely to contribute above the automatic deferral rate — and become more active investors.
