personal Young People Think They’ll Get Rich from Their Parents (They Wont)
For a lot of people, coming into a large chunk of cash is a nice dream, but rarely a reality. For young people, it’s an expectation.
More than half — 53 percent — of millennials and Gen Zers believe their parents will leave them an inheritance, according to a Charles Schwab report. From 1989 to 2007, 21 percent of people received an inheritance.
Millennials experienced the repercussions from the recession. Gen Zers saw how the recession affected their parents. This means both groups should be more secure in their financial futures and less reliant on others. But it looks like the recession doesn’t have any influence on their perception of money in the long-term. Their parents might be to blame.
“We live in an increasingly complex financial world, where our personal responsibility for financial management has increased dramatically, but our basic understanding of our finances has lagged behind,” says Carrie Schwab-Pomerantz, a Charles Schwab VP and President of the Charles Schwab Foundation. “We need to commit to educating our youth about money management, so they have the opportunities to achieve the financial freedom they want and deserve.”
That “lag” comes from generations missing out on basic financial knowledge and management. Because parents don’t know anything about money, they’re having a hard time teaching their kids about it. This could be leading young people to believe they’re expecting more than they will actually get.
The youth and money management: Perception might not be the reality
While the majority of millennials and Gen Zers are confident about their future inheritance, it’s not the only skewed vision they have. Among the Charles Schwab findings:
- Retire early: Young people expect to retire at 60 years old. This is sooner than many pre-retirees expect to retire (66) and even sooner than the average right now (62). Retirement might become extinct before then.
- Mortgages: 81 percent of young people want to own homes but only 54 percent think mortgages are “good” debt.
- Lifetime of debt: 51 percent of respondents say they currently have debt, but only 3 percent would pay down debt if they were given an extra $1,000.
The report says millennials and Gen Zers are overly optimistic about their financial futures.
“Young adults are accruing significantly more debt, but their savings don’t meaningfully increase,” the report says. “One-third (33 percent) of respondents say they skipped a meal because they didn’t have enough money.”
Parents are holding their kids back
Young people trust their parents have their best interests in mind — and shouldn’t they? But their trust might not be completely warranted. Almost 70 percent of respondents say their parents are good financial role models. Most — 67 percent — say their parents would rather talk about money than sex.
This is in line with older research. Most parents of millennials and Gen Zers would prefer to talk about money with their kids rather than sex. But parents still don’t know how to teach their kids about money. This means young people might be more misguided than they even know about.
Even so, young adults are still eager to learn about money management. According to the report, they want to know more about:
- Reaching their financial goals — 71 percent
- Keeping their financial information secure — 68 percent
- How to set themselves up for retirement — 65 percent
- Budgeting — 65 percent
- Learning the difference between good and bad debt — 55 percent
Talking about money at a younger age is a growing trend. Preparing for retirement is increasing among young people as well. More than one-quarter of millennials have more than $100,000 saved for retirement, even though they have decades left until they hit retirement age. But only 75 percent of baby boomers have the same amount saved — the generation that’s in retirement right now (or getting ready to).
Originally published at www.debt.com on October 1, 2018.