Gen Y’s Financial Lessons from Forrest Gump
By now we all should be aware that Gen Y* is a group of savers. According to our May Monthly Consumer Survey, more than two in five (41.9%) of these youngsters maintain plans to pad their piggy banks over the next three months. This compares to fewer than a third of Gen-Xers (29.6%) and just one in five Boomers (22.9%). (Silents clock in at 14.8%, but you’ve got to account for the large proportion of retirees in this group.)
Maybe Gen Y hasn’t taken on enough life “experience” in the form of children, mortgages, loans, credit, etc. to put paying down debt at the forefront of their financial priorities. Maybe Gen Y is still relying on $upport from their Boomer and Gen X parents while working their way up the pay scale. Or perhaps – having just experienced the Great Recession – Gen Y has learned a few lessons from its elder generations. Let’s examine some of these would-be lessons à la one of my faves, Forrest Gump.
[While I do realize that the oldest members of Gen Y were 11 when this classic hit the theaters, please...just humor me on this.]
Mama always said life was like a box of chocolates. You never know what you’re gonna get. Financial crisis, anyone? How about the housing meltdown, 9/11, Hurricane Katrina, dot-com bubble, war in the Middle East, or rocketing oil prices? [OK, we should have been prepared for a few of those.] Utopian society we are not; on both macro- and micro-environmental levels, we are always going to have something to be worried about. The difference between Gen Y and its older counterparts, though, is that the youngsters seemed to be preparing themselves for life’s uncertainties by improving their financial foundation. When asked to compare their personal financial situation to the previous year, more Gen Y-ers called their monetary “better off” (27.4%) than “worse off” (25.8%). In each of the older generations, those “worse off” outweighed those “better off.” Nearly two in five Boomers (38.0%) say they are “worse off” financially compared to this time last year, while just 14.5% think they are “better off.”
Stupid is as stupid does. Consumers buying on credit drove much of the spending growth we saw in the pre-recession 2000. Keeping up with the Joneses and living beyond their means left a lot of families in a lurch – and unable to keep up with their bills once the value of their McMansions plummeted, credit card fees and interest rates ratcheted up, and pink slips put many on the unemployment line. “Save not squander” might be the Gen Y financial mantra, as more than two in five (42.8%) say they are saving enough for future needs. This figure eclipses the rate of the second-highest financially prepared generation (Silents, at 31.0%) by a full 38%. Just over one in four Gen X-ers feel they are contributing enough to their piggy banks, while Boomers are the least likely to feel secure in their savings.
It happens. Is anyone 100% secure in their place of employment? Unfortunately, a high unemployment rate is currently a fact of life, and – let’s face it – the current 8.1% doesn’t account for those underemployed or discouraged workers. Gen Y may be having trouble securing their first jobs, working up the pay scale, and avoiding LOFO [last on first off] layoffs. But in the event that “it” does hit the fan, this generation is making the most of the income that they have – by saving at rates higher than any other group. Nearly half (45.4%) plan to save more than 10% of their annual income, much higher than Gen X-ers (31.3%) and Boomers (22.9%). Of course, this may in part be the result of fewer financial obligations [*coughs* mortgages…children], but at least Gen Y is consciously saving and not burning through their paychecks, right?
And that’s all I have to say about that.
For more information on this data, please contact BIGinsight™.
* Generations were defined for this analysis in the following manner:
Silent (born 1945 or earlier)
Boomers (born 1946 – 1964)
Gen X (born 1965 – 1982)
Gen Y (born 1983 – 1993)
Source: BIGinsight™ Monthly Consumer Survey – MAY-12 (N = 8789, 5/2 – 5/8/12)
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