Investing, saving pass by Gen Y

By Karl Henkel

khenkel@vindy.com

YOUNGSTOWN

Rachael Harvey is like many Americans, trying her best to make it through tough economic times.

The 24-year-old Warren resident has a steady retail job that helps pay her monthly bills, but she wishes she made a little more money — not to spend but to save.

“Right now I’ve got enough to get by,” she said. “But I don’t have that much [money] in the bank.”

It’s a dilemma facing many Americans amid rising inflation and high unemployment rates.

The doom-and-gloom news has Harvey, and many of her fellow millenials — or those in Generation Y — feeling the economic heat.

And according to two recent studies, those born after 1980 are overly negative when it comes to their financial futures.

About 25 percent people ages 20 to 29 rate themselves as financially independent, according to PNC Financial Services Group, Inc.’s recent Financial Independence Survey.

Only about 20 percent think they will have enough money to live comfortably after they retire, which could be more than a half-century from now.

“The pessimism was surprising,” said Dan Deskin, local retail executive at PNC. “I know they face challenging times, but the fact they’re feeling it kind of stood out to me.”

Only 26 percent of those ages 22 or 23 are optimistic about their financial future; that number plummets to 14 percent by ages 28 and 29.

“You move from 20 to 25 to 30, and things get gloomier and gloomier,” Deskin said.

Twenty-somethings also are pessimistic about investing.

According to a recent survey by MFS Investment Management, 60 percent of those in Generation Y consider themselves to be “savers” rather than “investors,” and 40 percent say they “will never feel comfortable investing in the stock market.”

Robert Gardner, CPA and financial adviser with Stifel, Nicolaus & Co. Inc., Butler Wick Division in Canfield, said he understands the financial difficulties of Gen Ys, and said the general lack of investing interest isn’t surprising.

“Unfortunately we can suffer from the effects of “recency bias,” or assuming current conditions will persist forever,” Gardner said. “The last decade alone has included two severe bear markets, and even seasoned investor discipline has been tested.”

Gardner said just a small percentage of his investors are a part of Generation Y. He said parents might have passed on their financial hesitancy to their children.  

Then add that Generation Y faces higher unemployment levels — in August it was 17.7 percent for those ages 16 to 24 (up from 11.2 a decade ago) and 10.2 percent for those 25 to 29 (up from 5.1 percent), according to the Bureau of Labor Statistics.

But just because some millennials have a job doesn’t mean they have money. “Younger investors tend to have less disposable income,” Gardner said.

Nearly 40 percent say they live paycheck to paycheck and said it’s not feasible to invest money in the stock market today, according to the MFS survey.

Harvey is part of that 40 percent and said she hopes to one day have enough disposable income to save and invest. She isn’t quite sure when that will happen.

“I’d definitely like to plan for the future,” she said. “I’m just not sure when I’ll be able to start.”