As Bertrand Russell famously put it: “the stupid are cocksure and the intelligent are full of doubt.” Could the British philosopher’s quote be an accurate description of the generations’ attitudes towards their finances? Two recent studies suggest so, finding that twenty somethings are both more likely to manage their own investments and more likely to be clueless about basic concepts such as diversification and inflation. Great combo, that.
First a recent, nationwide survey of over 1,000 people from Scotttrade, “shows that young investors (born 1983-1991, ages 18-26) are the most likely to manage their own investments and to describe investing as ‘fun and interesting.’” 24 percent of Gen Yers reported that they manage their own finances, compared to 12 percent of Gen Xers and 11 percent of Boomers.
There’s nothing necessarily wrong with managing your own finances and, of course, in your twenties with retirement a long way off, the argument can be made that investing is relatively low stakes and that the only people who are likely to actively manage their savings at that age are either ultra responsible or gung-ho “finance is fun” types. The Scottrade findings only become an issue when they’re paired with a recent study out of University of Michigan Retirement Research Center that shows, “financial literacy is low among the young; fewer than one-third of young adults possess basic knowledge of interest rates, inflation, and risk diversification.”
Here’s to hoping that the one third that actually know something about investing are the ones that are diving in and gleefully making all their own decisions about where to stash their cash. If not, Gen Y has a bit of a problem.
