A decade after the financial crisis, young Americans express optimism about their financial future and retiring early. But reality may alter those plans.
Results from Charles Schwab’s 2018 Young Adult Financial Literacy survey show that there’s been a tremendous shift in attitudes over the past decade. While young people in 2009 were “very concerned” about their personal financial futures, the 2018 research indicates young people are now much more confident.
According to the results, 81% of young adults age 16 to 25 witnessed their parents undergo financial hardship, but 76% believe they will have a better financial future than their parents. Moreover, these young adults, on average, expect to retire at age 60. And more than half (53%) believe their parents will leave them an inheritance, even though Bureau of Labor Statistics data show that between 1989 and 2007, only 21% of people actually received an inheritance.
Their optimism, however, may be leading to bad money habits. The study finds that many young adults lack the basic money knowledge essential to long-term financial success and don’t have a firm grasp of good debt versus bad debt. On average, young adults have accumulated savings of just $1,628 and debt of $8,003. In addition:
- only 38% believe student loans are good debt;
- respondents are similarly split on whether car loans are good or bad debt;
- 81% say they want to own a home, but only 54% believe a mortgage is considered good debt; and
- 51% say they currently have some sort of debt, but only 3% would pay it down if given an extra $1,000.
One bright spot is that young adults apparently trust their parents for financial advice and want to learn more. According to the findings, 69% of young adult respondents say their parents are good financial role models and their most trusted source for financial advice (39%) compared to a bank, online resources and friends.
Young adults also indicate strong interest in learning how to manage their money, including how to:
- make enough to reach their financial goals (71%);
- keep financial information secure (68%);
- save enough to be set in retirement (65%);
- manage a budget for necessities (65%); and
- learn the difference between good and bad debt (55%).
The online survey was conducted by Logica Research from June 12-20, 2018, among 2,000 Americans aged 16 to 25. Quotas were set so that the sample would be as demographically representative as possible.
