People born between the early 1980s and early 2000s are typically considered to belong to Generation Y. They are often described as being job hoppers, self-entitled, and even narcissistic. However, despite the perceived shortcomings of millennials, they have learned more from the financial crisis than any other generation.
The worst economic downturn since the Great Depression changed financial behavior across the country. According to a new study from Fidelity Investments, 81 percent of Generation Y now consider themselves more knowledgeable about their finances, compared to only 66 percent of older generations. In fact, 64 percent of Generation Y save more systematically, while 34 percent have increased household liquid assets in the wake of the credit meltdown.
“While the crisis served as a wake-up call for investors of all ages, this study found Gen Y may have experienced the most positive change,” said John Sweeney, executive vice president of Retirement and Investment Strategies at Fidelity Investments. “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. 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.”
Millennials are also the most upbeat age group. The study finds that 55 percent of Generation Y feel more confident as investors, compared to 47 percent of older generations. Furthermore, half of millennials say the economy is better now than it was five years ago. Aside from investing, 52 percent of Generation Y versus 41 percent of older respondents feel more confident in general.
With student loan levels on the rise, 26 percent of Generation Y respondents said personal debt increased over the past five years. However, 71 percent of said they started an emergency fund and 48 percent increased their emergency savings. Only 29 percent of baby boomers increased their emergency funds.
“Time is the biggest driver of success for young investors, followed closely by savings rate, asset allocation, and finally, fund selection,” added Sweeney. “Time is a lever that uniquely belongs to young investors, and for Gen Y, time is on their side. This research indicates they are saving early and often, which is a critical element for a successful retirement roadmap. To maximize their potential, Gen Y is well positioned to apply their optimism and confidence when it comes to developing strong financial strategies.”
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