Expecting an inheritance? Apparently so, if you’re a member of Gen Z. And that youthful optimism may deter these individuals from taking retirement savings seriously – with potentially damaging consequences.TD Ameritrade interviewed about 1,000 members of Gen Z (young people ages 13-22) and a similar number of parents, and found that almost 40 percent of Gen Z respondents believed that they will have an inheritance and therefore won’t need to worry about saving for retirement. In contrast, just 16 percent of parents thought as much.
That result was surprising, said Carrie Braxdale, managing director, investor services, TD Ameritrade, Inc., because this group of young people was generally pretty savvy about articulating the current challenges in the economy and job market. And with the majority of them already actively using some kind of investment or savings account, they also clearly had been taught about the importance of saving and thinking about a financial plan.
Still, they are focusing mainly on “savings needs that are more near-term,” Braxdale said. “Many explicitly said they are saving for college or current expenses.”
It’s going to become important to bridge the divide between Gen Z and their parents, because between economic challenges and rising healthcare costs, parents are realizing that their good intentions for providing an inheritance are diminishing with their own retirement needs, Braxdale said. Many parents are facing the reality that they are going to have to extend their working years into what they originally may have hoped would be their time for retirement, she said.
TD Ameritrade’s “Generation Z and Money Survey” is one of several generational surveys the bank has done in recent years in order to understand the early influencers that can affect the behavior of adults with their finances. TD Ameritrade can use information from these surveys to develop a host of online and other tools that assist people with understanding their financial needs.
But ultimately any tools won’t be helpful if parents don’t start having regular, and very candid, conversations with their kids about the state of the family finances. Parents need to learn to be more explicit in their lessons about budgeting and saving, Braxdale said. “A higher number of parents feel like they’re having the conversations, but they’re not resonating with the kids.”
What does this mean in real terms? Set up a regular time to talk with kids about budgets and finances. And use everyday activities as an opportunity to educate. During store outings, for example, role model how to delineate the difference between a “want” and a “need” when making a purchase, Braxdale said. Get in the habit of setting goals, and encouraging your kids to set goals with you, she said.
“In every generational study we’ve done, if parents are having good conversations and backing them up through positive role modeling, their kids’ chances for financial success as an adult skyrockets.” Braxdale said. Don’t “underestimate how powerful and direct that correlation can be. Children are listening and watching.”
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