Gen Y Personal Finances: A Crisis of Confidence and Capability

GEN Y & MONEY OVERCONFIDENT AND UNDERCAPABLE Filene Research Institute GENERATION Y IS OVERCONFIDENT 74% SAY 70% GEN YERS L AM GOOD AT DEALING WITH DAY TO DAY FINANCIAL MATTERS, SUCH AS CHECKING ACCOUNTS, CREDIT AND DEBIT CARDS, AND TRACKING EXPENSES. RATED THEMSELVES AS HAVING High FINANCIAL KNOWLEDGE BUT WE ASKED THEM 5 SIMPLE FINANCIAL LITERACY QUESTIONS ON: NUMERACY, INFLATION, RISK DIVERSIFICATION, MORTGAGES, & BOND PRICES ONLY 24% ANSWERED THE FIRST 3 QUESTIONS CORRECTLY AND ONLY 8% OF GEN YERS ANSWERED ALL 5 QUESTIONS CORRECTLY INCOME MATTERS THOSE WITH ANNUAL INCOME ABOVE $75,000 DID BETTER ON THE FIRST 3 FINANCIAL LITERACY QUESTIONS THAN RESPONDENTS WITH ANNUAL INCOME LOWER THAN $35,000 -LONG-TERM DEBT 55% OF COLLEGE RESPONDENTS CARRY STUDENT LOANS. HALF OF THOSE WORRY ABOUT PAYING THEM OFF. %24 66% OF ALL MILLENNIALS HAVE AT LEAST ONE SOURCE OF OUTSTANDING LONG TERM DEBT 40% 36% STUDENT LOANS 29% AUTO LOANS WOMEN (57%) AND NON-ASIAN MINORITIES (60%) ARE THE MOST MORTGAGE LOANS CONCERNED ABOUT ABILITY TO PAY STUDENT LOANS. SHORT-TERM DEBT 68% OF GEN YERS HAVE AT LEAST ONE CREDIT CARD 22% of ONE IN FIVE CARDHOLDERS HAS 4 or more 52% RETIREMENT ACCOUNT OWNERS TOOK LOANS OR HARDSHIP WITHDRAWALS FROM THEIR RETIREMENT ACCOUNT IN THE 12 MONTHS OF GEN YERS ENGAGED IN ONE OR MORE POTENTIALLY EXPENSIVE CREDIT CARD BEHAVIORS CREDIT CARDS PRIOR TO THE SURVEY 134% OF MILLENNIALS HAVE USED PAWNSHOPS OR PAYDAY LOANS IN THE PAST 5 YEARS LESSONS LEARNED STUDENT LOANS ARE A MAJOR SOURCE OF GEN YERS USE EXPENSIVE METHODS OF 1 DEBT FOR COLLEGE EDUCATED MILLENIALS BORROWING, SUCH AS CREDIT CARDS, - MOST ARE CONCERNED ABOUT THEIR S PAYDAY LOANS, PAWNSHOPS, AND OTHER ABILITY TO PAY OFF STUDENT LOANS ALTERNATIVE FINANCIAL SERVICES WHILE MANY GEN YERS HAVE RETIREMENT MANY MILLENNIALS LACK TRUST IN ACCOUNTS, A QUARTER ARE BORROWING O AGAINST THESE ACCOUNTS (22%) WITH POTENTIAL LONG-TERM CONSEQUENCES 4 FINANCIAL ADVISORS AND THINK PROFESSIONAL ADVICE IS TOO EXPENSIVE FOR THEM FOUR WAYS CREDIT UNIONS CAN HELP OFFER ACCESSIBLE, CONVENIENT ALTERNATIVES TO HIGH COST BORROWING ADDRESS DEBT AND DEBT MANAGEMENT IN EXISTING CHANNELS LIKE ONLINE BANKING, MOBILE BANKING, AND IN DAY-TO-DAY TRANSACTING 4 DEVELOP FINANCIAL EDUCATION TOOLS FINANCIAL EDUCATION TOOLS ARE THAT ARE INTRIGUING AND ENGAGING. LIKELY TO BE MORE EFFECTIVE IF THEY BECAUSE THEY ARE OVERCONFIDENT, TAFGET SPECIFIC FINANCIAL PRODUCTS, SUCH AS MORTGAGES, STUDENT LOANS, OR CREDIT CARDS THEY MAY BE DIFFICULT TO ENGAGE WHO IS GENERATION Y? Young • Ethnicaly diverse • Educated • Optimistic 70- 80 MILLION INDIVIDUALS BORN BETWEEN late 1970s E nid 1990s BY 2025, 33% LARGEST, MOST DIVERSE GENERATION IN AMERICAN HISTORY OF 25-29 YEAR OLDS HAVE EARNED AT LEAST A BACHELOR'S DEGREE 3 OUT OF 4 WORKERS WILL BE GEN YERS Gen Y Personal Finances: A Crisis of Confidence and Capability By Annamaria Lusardi and Carlo de Bassa Scheresberg Filene Research Institute, 2014 www.filene.org/research/reports For a detailed analysis of the nfcs data, please see: