Retirement and Generation Y

Those two concepts don't really go together for a lot of us. That's why some financial experts suggest we stop talking about helping Generation Y save for retirement and rather talk about saving for a "future." For me, "retirement" kind of conjures up golfing and Florida and cynical views about Social Security, and "future" sounds more like a European vacation. "Future" broadens the scope of what we are saving for to include whatever we want to do; maybe we won't stop working, but we still are likely going to need some savings.


As part of a series in PLANADVISER about how different demographics (and how financial advisers can help them), I wrote about how Generation Y is saving (or not saving) for the future. I found out some interesting stuff during the process of reporting. On one hand, Generation Y is really interested in saving, but, like all Americans, we are behind at actually doing it. Remember, we never learned financial literacy in school. As Good Morning America's Mellody Hobson says, it continues to boggle her mind why “you can take an elective in woodshop or auto, but take nothing about investing.”

Despite those sub-par American savings habits bestowed on us at birth, many financial firms and experts I interviewed have some optimistic things to say about the future wealth of America. To generalize, Generation Y is interested in investing, and doesn't want to make the same mistakes as our parents. We are particularly interested in responsible investing. Our reputation for being socially conscious translates into the desire to invest for good (e.g. investing in "green" companies, not taking on more risk than we can chew, etc.).

The bad news is, many members of Generation Y aren't actually putting money away. Survey after survey shows that many young people do not participate in their workplace savings plan, such as a 401(k). I won't say that contributing to a 401(k) makes sense for every situation, but many young people miss out on free money and tax benefits.

It will be interesting to see how the financial crisis affects the financial mindset of young Americans going forward, including how we save for our future. I'd like to say it might have made us ask the right questions (can we afford this house? do I need to diversify my portfolio? am I teaching my kids personal finance skills?), but old American habits die hard.