Gen Z's Worries: Affording College, Carrying Student Debt
A new survey by TD Ameritrade of Generation Z—those between 13 and 22—found the next generation of investors are, contrary to popular belief, keenly aware of the importance of money, with their top financial concerns evenly split between being able to afford college (39%) and having a large student loan balance (39%).
TD Ameritrade's Gen Z survey, released on Wednesday, also found that these youngsters do not necessarily prefer electronic communication to personal connections.
Gen Z’s worries over student loan debt are warranted as they've watched their parents struggle to pay back their own student loans—58% of Gen Z parents who were surveyed said they took out their own student loans, and of these, 43% are still paying them back. When asked what they would do with an extra $500, 55% of Gen Z respondents said they would save it, with another 11% saving it specifically for college.
The good news is that more than half (51%) of those parents who are still paying back their own college loans also have a 529 college savings plan set up to support their Gen Z child’s education.
When it comes to concerns about the economy, Gen Z and their parents said they were worried about the same things: jobs and unemployment, mentioned by one out of four survey respondents.
“Increased tuition costs and a bleak job outlook may be a cause for concern to some Gen Z teenagers, young adults and their parents, but being proactive and coming up with a savings strategy early on can help ease some of these financial anxieties,” said Carrie Braxdale, managing director, investor services, in a statement.
While 75% of Gen Z said saving money is important, and 41% said they have a budget and follow it closely, this generation is also showing signs of developing early bad financial habits. Among those Gen Z respondents who have a credit card, more than half (56%) have carried a balance for six months or longer (only 23% pay it off each month). Additionally, 23% of 19- to 22-year-olds and 41% of 16- to 18 year-olds say they do not have either a checking or savings account.
TD says that members of Gen Z who had experience with more financial products were found to be better budgeters, and on average those good budgeters had $850 more socked away in savings than those who didn’t budget as well ($950 vs. $100 saved).
Furthermore, the study found that one of the most common denominators for good budgeters was having had extensive discussions with their parents about saving money (67%) compared to those that aren’t good budgeters (34%).
“We found that parents are still the most influential variable when it comes to educating children on basic financial skills,” Braxdale said. “Parents who work with their children early to develop a financial plan and clearly set financial expectations can help better prepare them for financial success later in life.”
This article originally appeared at AdvisorOne.com, a sister of site of Credit Union Times.