Generation Y (those born between the years 1982 and 1995) are young and carefree. They have an apartment (or a room in mom and dad’s house). They have a car. They may even have a dog. What most do not have is savings.
Are you surprised?
If you’re a member of Gen Y, and you don’t have a savings account, then you probably don’t even care!
More than 80% of Generation Y workers said they plan to support themselves in retirement with savings they’ll put away later … Nearly 80% of Generation Y workers said day-to-day needs interfere with their ability to save. Source
Thanks to college loans, the cost of a vehicle, and day-to-day expenses, Gen Y continues to put off setting money away for retirement. Unfortunately, 61% of Generation Y also put purchases of iPods, big screen TVs and designer shoes ahead of savings.
So it’s really not all that surprising that young people are not saving or preparing for their financial future, is it?
The Quarterlife Crisis
In addition to being saddled with debt and lured by all the latest and greatest toys, many Generation Y’s just don’t want to save.
They prefer to revel in a new phenomenon called a quarter life crisis, which is characterized by a feeling of not feeling settled, and finding they are unhappy with the careers that they have worked toward for their entire life.
You keep thinking you’re in a rut, but you’ll grow out of it. Only you don’t grow out of it.
During this transition period — where they are no longer kids, but don’t feel like adults — they are more likely to purchase adult toys and eat pizza and put off the responsibilities of adulthood as long as possible.
Helpful books about the quarterlife crisis.
Inability To Save Money
Before you blame the young people for their lack of enthusiasm to grow up, first consider their unique situation.
The journey toward crisis begins at college graduation, when the typical student has about $10,000 in loans and no skills to land a decent job. Frank Furstenberg, professor of sociology at University of Pennsylvania, says the transition to adulthood is “more arduous today than it was 50 years ago.” Employers are not hiring people in their early 20s for staff jobs. “Employers hire temps for positions that don’t require experience. Society can incorporate people only when they get some experience working and there is a better match between employee and employer. Source
It’s no wonder Generation Y spends so many years trying to find themselves. They can’t even find a job! And without a proper job, it becomes difficult to save.
Still, in order to secure a brighter future for yourself, you really need to start saving something as soon as possible. So, what generation Y needs to understand is that for the 31% of young people under the age of 25 who do save for the future, they will be able to put away smaller amounts each month and use less risky investment options, as they grow older.
Therefore, if you start saving when you’re young, it will be far less painful.
Let’s say that, beginning at age 25, you put the equivalent of seven $4 Grande Lattes a week toward retirement, setting aside $121 a month. If you invest it in a stock mutual fund with annualized returns of 9%, you would see:
- $23,415 after 10 years
- $80,814 after 20 years
- $221,520 after 30 years
- $566,440, when you retire at age 65
Perhaps there needs to be a national commercial campaign that says, “Don’t drink that Grande Latte, put it in the bank instead.”
Must read: How Teens Can Become Millionaires (…see how a few dollars saved each week adds up quickly!)
I have been a certified tightwad striving for financial freedom since I became pregnant with my first child — and I decided to find a way to stay home with him full-time. I enjoy sharing my personal experiences in my journey back to financial health and planning for a future — which will include sending 2 kids to college and early retirement.
