Millennials and Generation Z are optimistic about their financial futures, but that may be leading to bad money habits, according to the Young Adult Financial Literacy Study by Charles Schwab. The study found that these age groups—the kids of the Great Recession—believe they will have a better financial future than their parents even though they lack understanding about how debt will affect their financial outcome.
According to the study, these young adults, aged 16 to 25, expect to retire at aged 60, 7 years before full Security Security benefit eligibility for their age. In addition, 53 percent believe their parents will leave them an inheritance, even though only 21 percent of people received inheritances between 1989 and 2007.
As a result of this optimism, young millennials and Gen Zers are accruing significantly more debt without growing their savings. Young millennials have saved just 15 percent more than Gen Z, but they have 169 percent more debt. And one-third of respondents said they skipped a meal because they didn’t have enough money.
“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,” said Carrie Schwab-Pomerantz, president of the Charles Schwab Foundation and senior vice president of Charles Schwab & Co., Inc. “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.”
