Younger Generations Not Saving Enough, Survey Finds

Young Americans are faced with new challenges that will affect how they manage their finances and prepare for their long-term financial security. To profile and better understand Generation X and Generation Y's current and future financial situation, the American Savings Education Council (ASEC) and AARP (on behalf of Divided We Fail) commissioned Mathew Greenwald & Associates to conduct a survey with members of these younger generations.

This research shows that:

• Many young adults have yet to align their actions with their financial values and goals. While 91 percent report having financial goals for themselves, only 53 percent report sticking to a monthly budget. And while 62 percent have given at least some thought to their own retirement, 61 percent feel their retirement savings is behind schedule. Nevertheless, there is hope that these young adults may change their behavior since they recognize it is a problem: 42 percent give themselves a grade of D or F to describe how well they are saving.
• There is a lack of financial sophistication among younger generations. When asked about basic investment concepts, many respondents chose not to even venture a guess. For example, when asked a multiple choice question to estimate a reasonable rate of return that can be expected from a diversified U.S. stock mutual fund over the long run, 41 percent said they were uncertain. In addition, respondents were more likely to say they are very knowledgeable about their iPod (40 percent), than about how to file their taxes (26 percent), buy a home (21 percent), invest outside of the workplace (15 percent), or save for retirement (15 percent).
• Four out of five young adults report having some type of non-mortgage debt. This includes 63 percent with credit card debt, 48 percent with car loans, 31  percent with student loans, and 27 percent with medical debt. However, more than three out of five describe their debt obligation as either a minor problem or not a problem at all.
• Workplace benefits are valued by employed young adults. At least three-quarters of employed young adults say it is important for their employer to provide health insurance, a retirement savings plan, matches or contributions to a retirement savings plan, a wellness plan, and education and/or advice on how to save for retirement.
• Many young adults feel things are harder for them than previous generations. Roughly half of those surveyed believe it is harder to support a family (54  percent), save for the long-term (52 percent), save for a child's college education (50 percent), and buy a first home (47 percent) than it was for previous generations.

The online survey of 1,752 Americans ages19 to 39 was fielded in January 2008. The data were weighted by age, sex, education and race. Click here for the full survey report and additional information.