A recent Finance survey about the money attitudes of young Millennials (ages 21 to 25) and Gen Z (ages 16 to 20) showed: today's teens and young adults are both optimistic and unrealistic.
While more than 80 percent of young people surveyed saw their parents experience financial hardship during the recession, 76 percent believe their own financial future will be better. But the behavior and other thoughts of this same group isn't so positive.
- Average savings is good at $1,600 but unfortunately average debt is more than $8,000—with Millennials saving only 15 percent more than Gen Z while accruing 169 percent more debt.
- Millennials and Gen Z's expect to retire at age 60—seven years before they'd be eligible for full Social Security benefits (and ten years before they would get the largest payout).
- More than half believe they'll receive an inheritance from their parents, which is increasingly less likely. In fact, according to a 2011 Bureau of Labor Statistics study, on average only 21 percent of people actually received an inheritance of any kind between 1989 and 2007.
They also showed a lack of understanding about the fundamentals of debt, particularly the difference between debt that can help them build their financial future versus debt that can lead to financial distress. For instance, only 54 percent believe a mortgage fits the 'good debt' category, perhaps related to seeing their parents lose their homes during the recession. Even more significant—and disturbing—is that a third of respondents do not recognize revolving debt, such as carrying a credit card balance, as 'bad debt'.
Taken all together, these survey results point to a great opportunity for parents to harness this youthful optimism and help their kids take concrete steps toward the bright financial future they envision. Below is one of the 5 steps outlined in this weekly series -
Step #1 of 5:
Talk openly about your own financial mistakes—and successes. Hopefully, we learn from our own mistakes, and perhaps our kids can learn from them too. Show them where you've failed (A bad mortgage? A late start on retirement savings?). If you can add in some real numbers, so much the better. But show them your victories too—and what you had to do to get there. There are lessons on both sides. Your experiences will be that healthy dose of reality to helping your child create a secure financial foundation.
Steps 2, 3, 4 and 5 will be posted each day this week as part of this series: 5 Step Series to Help Your Kids Create A Bright Financial Future
Source: CARRIE SCHWAB-POMERANTZ