A recent study shows that Generation Z — those young people between the ages of 13 and 22 — are already saving and thinking about how they will pay for college.
Growing up in downturn
Earlier studies have indicated that young adults — so-called Generation Y, or Millennials — are more knowledgeable and concerned about money than was the generation before them. Experts generally agree that their coming of age in a time of economic uncertainty has a great deal to do with that. But what about those who lived through the Great Recession at a much younger and more impressionable age?
The new study by TD Ameritrade indicates that these young people watched their parents struggle through the financial crisis, and have learned from that struggle. Alternately, you could say they are rebelling, as young people will, and choosing not to make the same mistakes as their parents. Either way, it is a hopeful glimpse at the economic leaders of the future.
Carrie Braxdale, managing director of investor services at TD Ameritrade, said:
“They are doing a nice job understanding the challenges they may face. It was impressive and surprising to see how well aware they are around the importance of money.”
According to the report, three in four Gen Zers surveyed agreed that saving was important. Many are already saving, with an average of $300 stashed away each. Forty percent said they already have a budget that they adhere to. When quizzed about what they would do with an extra $500, 55 percent said they would put it into savings. Eleven percent said they would earmark those savings for college.
Respondents also watched their parents struggle with student loans, well into their professional lives. Saving for college was an important goal cited by many in the study. Only a quarter acknowledged that they may need student loans or other assistance to get through college, even though that may not be all together realistic.
“They are very optimistic. A lot of this could be a bit influenced by the span of time between where they are now and when [college] would become a reality for them.”
Talk is cheap
Still, for all their concern about money and the future, only about a quarter of the respondents who have credit cards routinely pay off their charges each month. Not doing so can result in, not only a higher principal to pay down on the loan, but escalating interest rates and possible fees.
Begins at home
The young people surveyed whose parents talked with them about money fared better than others at budgeting and saving. It all starts at home, according to the study:
“[Parents] are still the most influential variable when it comes to educating children on basic financial skills.”