Young Adults’ Financial Practices Quite Different
PITTSBURGH -- The financial habits and practices of those 20 to 24 years of age are very different from those of older adults, finds PNC Wealth Management’s newly released financial independence survey.
Those conducting the survey sought insights into the financial patterns and mindsets of 20- to 29- year-olds, PNC said, by comparing responses both within the age group and among those with and without higher education.
Of respondents who said they have debts, those 20 to 24 carry just half -- $17,100 -- that held by those 25 to 29, $35,600. Nearly one-third of the younger set carry no debt whatsoever, compared to the older set, noticeably lighter at just one in five.
Another key finding: Among respondents who have attended or graduated from college, the average reported debt was $31,800, a “noteworthy” 30% drop – as Cary Guffey put it -- from $45,400 in 2011. “Financial maturity in this generation has noticeably shifted,” said Guffey, a certified financial planner and financial adviser at PNC Wealth Management.
“Younger [adults] just entered adulthood when the economy shifted downward,” he said in a prepared statement, “and as a result, it’s clear they’ve become more cautious by avoiding debt.”
Categories of debt also varied considerably between the two groups. In the older set, amounts of debt amounts were reported at double, triple and quadruple those 20 to 24 when it came to car loans, credit cards and mortgages, respectively. One category where both age groups fall in-step is education: about 40% of all ages 20 to 29 claims to owe on student loans.
Varied Saving Patterns
While debt numbers are trending down, so are the number of young adults claiming to save, dropping 6% overall since the 2011 survey. Younger respondents however, are more likely to save, 90%, than their older peers, 83% and set aside to a larger portion of their annual income for short- and long-term saving combined, 59%, than the older set, 52%. Young adults hold ambitious goals when it comes to major life events that will require financing later on. Regardless of age, 74% think they’ll own a home before age 35; two-thirds think they will retire before or in their early to mid-60s; and 62% responded they have considered starting a business.
Reported saving patterns, however, do not currently reflect these aspirations. Just 11% claim to be saving to buy a residence, 4% to start a business, 9% to start a family and just 6% for retirement. The top savings category regardless of age is emergency funds.
Starting 2014 Right
The goals of those 20 to 24 are ambitious, PNC says, but not unattainable regarding owned assets, careers and retirement. Based on survey results, credit scores and saving continue to stand out as categories where young adults generally are doing nothing. Steps they could take to improve their finances:
- Better Credit: Having credit can boost credit scores, but they should make minimal use of credit cards. Big balances can drive scores down, even if the holder makes payments on time.
- Don’t save blindly so you can make the down payment on your first house: Having a real number in mind maintains motivation and provides a way to measure progress. Research houses you can afford and take 20% from that to set a firm goal.
- Starting business is more than about making money: If you’re not financially ready to quit your day job, use time wisely to research and write a solid business plan.
- Don’t turn down the tax incentives offered through IRAs or employer matches to help you save for retirement. Start contributing at least the minimum amount each month to your employer’s 401(k) plan. Most find the small percentage deducted from their paychecks is hardly noticed.
SOURCE: PNC Wealth Management.
Published by The Business Journal, Youngstown, Ohio.
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