The terms “Generation X” and “Generation Y” are marketing terms without concrete dates, but they typically refer to people born between 1965 and 1999. Baby Boomers get a lot of attention from financial companies and advisors, but these Gen X and Gen Y Americans should be getting some attention as well. According to Insurance News Net’s Robert Dixon, “Gens X And Y (are) Uninformed About Financial Products.” These generations have money to spend and should definitely be considered important to the financial industry. But more importantly, the need to inform them about finances is crucial because they might be the first generations solely financing their own retirements through their savings. Where will that leave those who haven’t saved yet?
A majority of consumers don’t even understand the basics of finance and that really hurts their chances of saving enough for retirement. LIMRA recently performed a study about financial literacy and found that only 20% of Gen X and Gen Y consumers work with some sort of financial professional. Those who do are more likely to claim they are “very knowledgeable” about finances, but even then it is only 14% of them. That is a step up from the 6% of Gen X and Gen Y consumers who don’t work with a professional and claim they are very knowledgeable. While those consumers who are married and those who have graduated from college are more likely to be very knowledgeable about financial information, the percentages are still well below 10%.
Baby Boomers are even less likely to say that they are very knowledgeable about investments and other financial products like annuities, believe it or not. But they are also less likely to say that they are “not at all knowledgeable” than their younger peers. Of the Gen X and Gen Y consumers in the study, 21% of them said they had no knowledge of financial literacy, while 18% of Baby Boomers said that. When Gen X and Gen Y consumers participate in a defined contribution plan like a 401k at work, they are more likely to have financial knowledge. But getting younger generations to participate in their work savings plans can be difficult because retirement seems so far away and they let their short-term goals take precedence.
There is quite a market right now for the retirement savings of Gen X and Gen Y consumers, despite the fact that many of them aren’t saving at all. Gen X households have about $3 trillion in financial assets, nearly half of which is in retirement savings. Those contributing to employer sponsored plans have been putting money in on average for 9 years and are deferring around 6% of their income. Gen Y households have around $229 million in financial assets and have been putting money into employer plans for an average of 4 years. Baby Boomers get a lot of attention from the financial world, but they need to take note of Gen X and Gen Y as well. These generations of consumers need more financial knowledge and more help saving for their future retirement, even if they don’t realize it yet.
Written by Rachel Summit