Mounting debt, higher costs of living and other hurdles are getting in the way of early adults (ages 18-34) reaching their goal of financial independence, according to the new Merrill/Age Wave study, Early Adulthood: The Pursuit of Financial Independence. The study takes an in-depth look at the experiences and challenges of contemporary early adults, who now make up one-third of the workforce. Understanding the goals and motivations of this employee segment can help tailor workplace benefits and programs to help relieve some of their financial stress and be productive members of your team.
Source: Early Adulthood: The Pursuit of Financial Independence, April 2019.
“Early adulthood is an exciting time of exploration and self-discovery, but there are new choices and challenges as well. Today’s young adults are encountering more complex financial paths than prior generations—forcing them to postpone life milestones and putting their ability to save for retirement at risk,” said Lorna Sabbia, head of Retirement and Personal Wealth Solutions at Bank of America. “To achieve financial independence, early adults can focus on developing smart financial habits, identifying areas to cut expenses to free up money for their goals, and seeking financial education and guidance.”
Key findings from the study include:
|•||Early adults struggle to pay off debt. One in four early adults with a 401(k) has already made an early withdrawal, primarily to pay off credit card and student loan debts.|
|•||Financial resources are the top barrier to achieving goals. Early adults cite finances as their top source of stress and foremost barrier to achieving their life goals, such as buying a home and starting a family.|
|•||Being debt-free defines financial success. As early adults confront nearly $1.6 trillion in cumulative student debt today1, 60 percent define financial success as being debt-free, compared to only 19 percent who say financial success is being rich.|
|•||Early adults crave financial guidance and role models. Nearly three-fourths of early adults (72 percent) say they would benefit from more financial guidance—more so than those in any other life stage.|
|•||Parental financial support is the norm. Seventy percent of early adults have received financial support from their parents in the last year, and as many as 58 percent say they would not be able to afford their current lifestyles without ongoing parental support. The aggregate amount spent by parents today on their early adult children is enormous—more than $500 billion annually2.|
|•||Support goes both ways. As lifespans increase, children may also be providing more support—both financial and caregiving—to their parents down the road. Eighty-nine percent of early adults say they would be willing to “pay it back” by financially supporting their parents in the future.|
|•||Social media is exacerbating financial pressures. With two-thirds (68 percent) of early adults fearing they are continually missing out on what their peers are experiencing and half (49 percent) feeling addicted to social media, early adults are comparing their financial accomplishments to their peers online. Eighty-two percent of early adults say they feel pressure to make a lot of money and 60 percent feel pressure to buy things they cannot easily afford.|
|•||Work isn’t “working” for many. Forty-six percent say they plan to look for a new job in the next 12 months, the top reason being higher pay (69 percent). Finding work that combines meaning with adequate pay is a growing challenge. Less than half of employed early adults feel that in their current job, they have career potential (44 percent), fair compensation (41 percent) or work that aligns with their passions/interests (35 percent).|
Download Early Adulthood: The Pursuit of Financial Independence today.
Talk with your Bank of America representative about strategies to enhance your financial wellness and benefits programs to address the specific needs of this employee segment.
Offer seminars and workshops on debt management, retirement planning, caregiving and other priorities defined in the study.
Encourage employees to access related resources on the Education Center.
Early Adulthood: The Pursuit of Financial Independence surveyed a nationally representative sample of more than 2,700 respondents in the United States, with a focus on Americans ages 18 to 34.
1 Federal Reserve Bank of New York, “Center for Microeconomic Data,” 2018.
2 Merrill/Age Wave, The Financial Journey of Parenting: Joy, Complexity and Sacrifice, 2018.
Age Wave is not affiliated with Bank of America Corporation.