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Filene: Gen Y Personal Finances – A Crisis of Confidence and Capability
Wednesday, May 28, 2014 6:55 AM

Generation Y is the largest, most diverse generation America has ever seen, and this demographic is made up millions of individuals born between the late 1970s and the mid-1990s. While this generation is young, ambitious, educated, and optimistic, many Gen Yers lack adequate personal financial management skills, according to a Filene Research Institute report.

As a result of their lack of financial knowledge, many Gen Yers face the grim reality of long term debt related to higher education, expensive spending behaviors, and credit cards. What further exacerbates this problem is this generation's overconfidence and reliance on alternative financial services such as payday loans and pawnshops. 

Filene’s report reviews data from the most recent National Financial Capability Study (NFCS), to better understand Generation Y's financial capability and long-term financial planning. This study uses a subsample of the NFCS data to examine financial capability among young Americans aged 23–35. With a sample of over 5,500 observations, this study is able to break down the data by demographic characteristics such as marital status, ethnicity, education, household income, and employment type.

The data reveals key insights on Gen Yers' personal financial characteristics. For instance, 66 percent of Gen Yers have at least one source of outstanding long-term debt whether student loan, mortgage, or car loan, and 30 percent have more than one source of long-term debt. Since the data also concludes that many Gen Yers lack financial literacy, credit unions have an opportunity to step in and help. With tactics that focus on debt management and financial literacy, credit unions can target the most problematic areas for Generation Y. A high income and college degree is not indicative of how prepared an individual is to manage their finances. Financial illiteracy is a serious issue for millenials. 

The report is available on Filene’s website.