Gen Y Acting on Hard Lessons Learned

The study by Fidelity Investments, which examines the attitudes and behaviors of investors since the financial crisis began five years ago, reveals 81% of Gen Y now consider themselves more knowledgeable about their finances, compared to 66% of older generations. In addition, when it comes to confidence levels, Gen Y is faring better: 55% of Gen Y versus 47% of older generations feel more confident as investors. Additionally, 64% of Gen Y versus 54% of their elders now save more systematically.

“While the crisis served as a wake-up call for investors of all ages, this study found Gen Y may have experienced the most positive change,” said John Sweeney, executive vice president of Retirement and Investment Strategies at Fidelity Investments. “Gen Y remains surprisingly confident despite suffering investment losses, and especially given that many also saw the impact the crisis had on their parents, who were approaching or in retirement. Rather than overreacting, Gen Y has taken a more deliberate approach to their finances, recognizing the need to assume control of their spending and investing habits, and showing a willingness to do things differently. These are important factors when it comes to weathering any financial challenge.”

The survey findings also suggest Gen Y has a different approach than older generations when it comes to making financial and investing decisions:

• A more socialized financial experience – At the start of the financial crisis, Gen Y turned to family and friends for financial advice more than other generations (37% versus 23% of Gen X and 25% of Boomers). They were also more likely to conduct online research (34%) and use online tools and calculators (23%).
• Emergency funding – Although 26% of Gen Y respondents said personal debt increased these past five years, 71% of respondents started to maintain an emergency fund and 48% increased their emergency savings. In comparison, while 21% of Boomers saw personal debt increase, slightly more than half (52%) started to maintain an emergency fund and only 29% increased their emergency savings.
• A focus on saving – Thirty-four percent of Gen Y respondents increased household liquid assets, and 39% of Gen Y increased contributions to a tax advantaged retirement savings account. Employer-sponsored retirement savings plans (32%), IRAs (21%), and personal real estate (29%) also have increased in importance for Gen Y.

The Fidelity Five Years Later study was conducted online among 1,154 adult investors by GfK Public Affairs and Corporate Communication using GfK’s KnowledgePanel during the period of February 12 to 25, 2013. More information is here.