Survey: Many Young Adults Wrongly Believe an Inheritance Will Secure their Financial Future
Today’s young people may be overly optimistic about their financial futures, despite weathering crippling student and consumer debt loads.
A new Charles Schwab survey found that 53% of young adults believe their parents will rescue them by leaving them a windfall upon their demise, allowing them to retire early and possibly accrue more debt along the way.
That’s despite the fact that more than 70% of inheritances are less than $50,000, according to the Federal Reserve Board.
The Charles Schwab survey of 2,000 Americans aged 16 to 25 revealed young adults expect to retire at 60, a full seven years earlier than when they would qualify for full Social Security benefits, based on their age bracket.
The poll also found 76% of young people believe they will have a better financial future than their parents did, yet many continue to struggle to make ends meet, with 33% saying they had to skip a meal because they didn't have enough money.
Being overly optimistic about money may also lead to bad habits, according to the survey. Respondents reported carrying $8,003 in debt, and having only $1,628 in savings on average. Worse, they were confused about debt in general, and in particular, what constitutes good debt versus bad debt.
The silver lining: Young people want to learn more on how take control of their finances, from saving for retirement (65%), to creating a budget (65%), to understanding the difference between good and bad debt (55%), according to the survey. And who do they turn to most for advice? Their parents.
Here are some tips on learning how to manage money:
Read and heed. This year’s must-read finance books will help you learn how to get rich, save for retirement and get out of debt.
Create a budget. Money management requires a detailed, written spending plan that factors in your income and quantifies necessary expenses.
Save for retirement. Saving and investing in retirement plans while you work will help you enjoy financial liberation when you retire. Some of your options include contributing to a 401(k) plan through your employer, IRAs and Social Security.
Understand good versus bad debt. It’s important to understand the nature of what you owe. "Good debt," in general, is favorable to consumers: student loans, mortgages and home improvements. “Bad debt” includes revolving credit card debt, long-term car loans and payday loans.
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