Gen Y upbeat about retirement savings
By Paula Aven Gladych
Generation Y learned a lot about finances during the Great Recession and took more positive financial action since 2008 than any other generation.
So says Fidelity investments based on a study it conducted on the attitudes and behaviors of investors since the financial crisis began five years ago. It found that 81 percent of Generation Y — those born between 1981 and 1988 — believe they are more knowledgeable about finances now compared to only 66 percent of those in older generations.
Gen Y also is more confident as investors than older generations and is saving more since the recession hit.
“Gen Y remains surprisingly confident despite suffering investment losses, and especially given that many also saw the impact the crisis had on their parents, who were approaching or in retirement,” said John Sweeney, executive vice president of Retirement and Investment Strategies at Fidelity Investments. “Rather than overreacting, Gen Y has taken a more deliberate approach to their finances, recognizing the need to assume control of their spending and investing habits, and showing a willingness to do things differently. These are important factors when it comes to weathering any financial challenge.”
Generation Y also is more optimistic. Fidelity found that 52 percent of these younger investors vs. 41 percent of older respondents describe themselves as more confident in general now that the recession is a few years behind us.
That attitude includes a certain level of optimism about the broader economy and the stock market. In fact, 50 percent of Gen Y vs. 30 percent of Gen X (those born between 1965-1980) say the economy is better now than it was five years ago. And 76 percent of Gen Y vs. 56 percent of baby boomers believes their investments have fared better since then.
The survey findings suggest Gen Y’s more optimistic outlook contributes to a different approach than older generations when it comes to making financial and investing decisions:
- A more socialized financial experience – At the start of the financial crisis, Gen Y turned to family and friends for financial advice more than other generations (37 percent vs. 23 percent of Gen X and 25 percent of boomers). They were also more likely to conduct online research (34 percent) and use online tools and calculators (23 percent).
- Emergency funding – Although 26 percent of Gen Y respondents said personal debt increased these past five years, 71 percent of respondents started to maintain an emergency fund and 48 percent increased their emergency savings. In comparison, while 21 percent of boomers saw personal debt increase, slightly over half (52 percent) started to maintain an emergency fund and only 29 percent increased their emergency savings.
- A focus on saving – Thirty-four percent of Gen Y respondents increased household liquid assets, and 39 percent of Gen Y increased contributions to a tax advantaged retirement savings account. Employer-sponsored retirement savings plans (32 percent), IRAs (21 percent), and personal real estate (29 percent) also have increased in importance for Gen Y.
Originally published on BenefitsPro.com