While the pandemic has had far-reaching economic consequences for almost every group in our society, adults under 25 have been hit with some of the toughest financial impacts. With unemployment rife, travel restricted, and family finances stretched, those aged between 18 and 25 years old are just starting their financial independence journey and facing the prospect of, well… fewer prospects.
We know the earlier someone starts saving for retirement, the more likely they are to achieve their target – but this has always been a tough sell to young people.
Even before the pandemic, barriers to retirement saving had been mounting. Tuition fees have risen and student loan debt has soared, making it difficult for recent graduates to balance their newly assumed financial responsibilities with the natural desire to socialize. This year, they’re facing the additional challenge of widespread economic hardship and uncertainty.
Against this backdrop, how can employers persuade young people to divert some of their income away from other priorities and save for their future?
Enter the perfect focus group: Buck’s 2020 summer interns
Every year, across our business, we provide an immersive experience to a select group of college students, introducing them to our business. This year, our 19 U.S. interns participated in a survey and group discussion to explore how this generation thinks about, prepares for, and conceptualizes the ever-changing landscape of retirement and financial wellbeing. Here’s what we learned.
How confident are you about achieving your life’s financial goals?
We started by getting a sense of how confident these college students felt about their ability to buy a home and pay off student debt by the time they turned 30 years old.
Initially, the interns were impressively confident. However, once we began discussing the issue of student loan repayments, it became clear that the group’s understanding of the payoff process was lacking, leading to a degree of overconfidence. The idea of taking out additional loans to finance grad school was also a clear source of financial anxiety for the group.
What are your thoughts around career mobility?
While the idea of a “job for life” has become largely antiquated, a majority of the students felt that movement among employers would be necessary to obtain new career challenges and advancement, and even pay accelerations.
While some said they might stay at one employer for their entire career, they also felt that this would make it more challenging to achieve their stated goals of career challenges, advancement, pay increases, and management responsibilities. This perception is something organizations should look at and perhaps even address as part of their talent retention programs.
When do you hope to retire?
The group confirmed our expectation of a gap between desired (sometime in their 50s) versus expected (late 60s) retirement age. Having witnessed many of the challenges faced by baby boomers in preparing for retirement, they understood that often, retirement doesn’t occur when desired. Pragmatically (or perhaps resignedly), most said they expected to work in another field or take a phased approach to retirement when the time comes, as opposed to stopping work altogether.
In terms of retirement savings strategies, when asked where they expect their savings to come from, only one of the 19 respondents even mentioned Social Security, illustrating a serious degree of skepticism in the stability of this federal program.
How much do you know about budgeting?
Another topic which emerged during the discussions was an apparent lack of financial education in certain areas, including:
- The development of a credit score/rating and what can help or hurt these numbers, placing them at risk of struggling with a plethora of financial matters in their short- and medium-term futures
- How to prepare for a financial emergency (having easily accessible savings)
- Setting up a budgeting process that tracks spending and inflow versus outflow
Building financial resilience
A key takeaway from this feedback is the need to help the younger generation improve their financial education. With economic uncertainty touching the lives of almost all Americans, our interns and their demographic are already staring down the barrel of a significantly more difficult start to their careers than many of their predecessors.
It is therefore incumbent upon employers to provide them with a working understanding of how to maintain their immediate and future financial wellbeing and, perhaps more crucially than ever, personal financial resilience to help them on the path to long-term financial success.