Source: Schwab Families and Money Survey
While the recession obviously is a major headwind for Gen Y (and every Gen for that matter) a research report from Demos makes the case that a confluence of events at play for decades is driving the diminished expectations for Gen Y
Even before the recession, today's young adults were on track to have the dubious distinction of being the first generation in a century not likely to end up better off than their parents. Stagnant wages, job insecurity, the decline in employer sponsored health insurance and retirement benefits, rapid increases in the cost of basic expenses, soaring debt, and minimal savings have diminished the prospects for opportunity and mobility. Thirty years in the making, government policy has failed to cushion the blow of these trends.The Tools to Play a Crappy Hand
Without minimizing the problems Gen Y faces, I'm still not ready to write its financial obit. As I said in an earlier post, I happen to think Gen Y has it over Boomers. From starting to dollar cost average into a stock market that is not at epic highs, to having the skills and thick skin to maneuver in the new age of career free agency, Gen Y isn't exactly without the tools to succeed.
And while this is not exactly helpful to anyone looking for a job right now, a recent study co-authored by Northeastern University professor Barry Bluestone on future labor force trends, asserts that by 2018 there will be plenty of job opportunities for retired Boomers, because there simply won't be enough workers in the younger generations to sop up employer demand. While Bluestone's research was focused on the impact on "encore careers" for retired Boomers, he notes that his findings are "good news for the younger generations. If we're right, there will be competition for this scarce commodity [younger workers]." It may be hard to fathom today, but Gen Y just might be in high demand right as it heads into its prime career years.
In the meantime....
How Parents Can Help Their Kids to a Better Financial Future
Supporting changes in our entitlements program would be a big help of course. Younger generations, including Gen Y, clearly can't bankroll the current level of Social Security and Medicare benefits. We'll no doubt be hearing more about that now that President Obama's BiPartisan Deficit Commission is grinding away on coming up with some ideas.
Of course, the entitlement debate is likely to make the health care debate look like a cakewalk. Parents who want to help their Gen Y kids right now, might consider giving their young adult kids money to contribute to an IRA. Parents can indeed be the funding source for an IRA; the only stipulation is that your kid must have earned income at least equal to the IRA contribution. But the actual money doesn't have to come from your kid's earned income. Fund a $5,000 Roth IRA for a young adult starting today and you could be setting them up to have a $1 million nest egg in retirement. That's a nice head start on helping your child "do better" than you.