The MacroMonitor surveys household financial decision makers. Fewer households than previously are headed by individuals age 32 or younger. For example, 12.6 million households currently have a nondependent "child" member (the boomerang phenomenon). The surveyed Gen Y–headed households are more established than their counterparts, who have not yet achieved financial independence.

Demographics

• Gen Y members are born in 1979 or later.
• Of 128 million US economic households, Gen Yers head 16.3 million.
• Their median income is $37K; their mean income is $50K. More than one in four have an annual household income of $20K or less.
• Their average liability is $69K; financial assets, $30K; home equity, $36K; net worth, $46K.
• Somewhat more than one-quarter of Gen Yers have some college experience but no degree, 33% are single, 15% cohabit, 43% have dependent children, 31% live in an apartment, and 28% live in a medium-size city.

Products and Services

• Assets: Gen Yers are less likely than other age cohorts to have assets. However, they are just as likely as other cohorts to own savings accounts (56%); 401(k)s, 403(b)s, and 457s (42%); and vehicles (78%).
• Debts: Gen Yers are less likely than other age cohorts to have any equity-based debt. They are more likely to have debt for vehicles (40%), consumer loans (40%), and education loans (29%).
• Gen Yers are just as likely as other cohorts to have credit-card balances, but their average outstanding balance is lower ($3,700).
• Gen Yers are less likely than other age cohorts to have most forms of insurance.

Financial Attitudes with Which Gen Yers Are More Likely to Agree Than Are Other Age Cohorts (mostly and somewhat agree)

• I would be very interested in a savings plan for my children's education. (60% agree)
• I am worried that I will not be able to get a loan when I need one. (59% agree)
• I am always looking for the lowest-cost financial service. (76% agree)
• I feel as though I am living on the edge—one paycheck, illness, or accident from being unable to make ends meet. (61% agree)
• Buying life insurance is a good way to save for the future. (66% agree)
• It's important to have enough life insurance to cover three years of household expenses. (77% agree)
• My household is considering eliminating some relationships with financial institutions to simplify our finances. (39% agree)
• I'm a spender rather than a saver. (43% agree)
• I am concerned that our household has more debt than it should. (55% agree)

Gen Yers are the least likely to agree that "Our household's spending habits have not changed much in the past 2 years."

Interesting Tidbits

Gen Y households have different savings and investment goals than do households headed by other age cohorts. They are more likely than other households to name as goals:

• Provide for rainy-day emergencies (56%).
• Take a vacation or travel (48%).
• Buy a home (42%).
• Provide for education (32%).
• Make a major purchase (32%).
• Buy a vehicle (32%).
• Marry, have children (26%).

More than all other age cohorts, Gen Y–headed households name the need to borrow money to finance a home (31%) as very or extremely important.

Implications

Gen Y members are in a formative stage; they are starting to develop careers, marry, buy homes, and start families. As a result, many of their financial goals have a short-term focus. The economic roller coaster of the past decade has hit these young households hard at a particularly vulnerable time—just as they start their independent life path. For the most part, starting salaries are low, depressed housing prices are still out of reach for the majority, student-loan debt may be high, credit scores do not qualify them for loans, and the rising cost of basics such as food and fuel constrain disposable income. Continued diminished rewards and economic uncertainty will reduce the overall lifetime earnings of many Gen Yers and ensure a more pessimistic mind-set than that of previous generations. This hunker-in–the-bunker mind-set is evidenced by their concern about buying a home, reducing debt, saving, and securing life insurance, for example.

Gen Y households are the first generation weaned on microprocessors, social media, and economic uncertainty; life expectations may be beyond their ability to fund. They expect on-demand delivery through technology use; they don't have a great deal of patience. Because most of their present needs are basic and transactional, they perceive financial products as commodities. Don't expect Gen Yers' perceptions to change radically as they mature and financial needs expand to include investment products and information and advice. Unlike many members of previous generations, Gen Yers tend to be self-absorbed. Many believe that in life, you're on your own (YOYO). This attitude results in higher levels of skepticism, cynicism, and distrust than previously existed among young adults.

Financial providers are challenged to meet Gen Yers' needs. The good news is that Gen Y loyalties to products, brands, and providers—with few exceptions—have not been solidified. To date, no financial institution has made a serious attempt to win over the generation that represents the future of their business. One strategy to win over Gen Y is to make a product or service promise and then overdeliver.

For more information, contact CFD.