Schwab MoneyWise ®

2018 Young Adult Financial Literacy Survey

As the Great Recession generation comes of age, they're both optimistic and looking for direction.

The 2018 Schwab Young Adult Financial Literacy Survey found that just a decade after the financial crisis, young adults are optimistic about their financial futures. This comes as a surprise when you consider that more than 80% of the young adults surveyed witnessed their parents experience financial hardship during the Great Recession.

Fortunately, these young adults also exhibit a strong interest in learning more about how to manage their finances. And research shows they trust their parents to provide the best guidance in this arena. In fact, most young adults (69%) say their parents are good financial role models, and many (39%) say their parents are their most trusted source for financial advice.

With all that in mind, here are additional key survey findings that reveal the financial challenges facing Gen Zers (those born between 1998 and 2002) and Young Millennials (those born between 1993 and 1997)—along with resources to help steer conversations about money management toward future financial success.

Young adults believe their futures will be bright—but lack a strong basis for that belief.

The majority of young adults are optimistic about their financial futures, but to a degree that some might find a tad unrealistic.

They expect, on average, to retire at age 60—seven years earlier than full Social Security benefit eligibility for their age bracket. Additionally, more than half (53%) believe they’ll inherit assets from their parents—while only 40% of parents say they plan to leave an inheritance.

Their expectations for the future also appear to be in conflict with their current financial reality. More than three-quarters (76%) of young adults surveyed believe they will have a better financial future than their parents, despite simultaneously reporting significant present-day financial struggles.

For instance, one-third of young adults (33%) reported skipping at least one meal in the previous year due to lack of funds, and nearly one-fourth (21%) sold possessions to cover a bill they would not otherwise have been able to pay. Perhaps most importantly, the majority of young adults are experiencing difficulty attaining financial independence, but say it’s their top goal.

Four in five young adults are not financially independent—yet 75% consider it a top goal.

While 16% define financial success as getting a high-paying job, and 12% say it’s owning a house, far more young adults (46%) define financial success as being able to live independently, without financial help from their family.

Becoming completely financially independent is a top goal for 75% of young adults. Yet only 12% of Gen Zers and 28% of Young Millennials say they are already financially independent—and most believe it’s at least a couple of years off for them. The average age at which Gen Zers expect to achieve financial independence is 25; for Young Millennials, that age jumps up to 29.

25% of young adults get most of their money from their parents.

A large part of the reason young adults feel financial independence is years away may be that they aren’t calling on mom and dad just for occasional help to make ends meet. Many consistently rely on their parents for most of their cash.

Primary sources of income
    • 25% Parents
    • 23% Full-time job
    • 22% Part-time job
    • 7% Odd jobs (babysitting, dog walking, etc.)
    • 5% Income from selling or reselling things
    • 4% Financial aid
    • 4% Government benefits
    • 3% Freelancing
    • 2% Trust fund
    • 5% Other

When asked about their primary source of money, 25% of young adults point to their parents, while only 23% list a full-time job. Other primary sources of income include part-time work (22%) and odd jobs (7%). A small but still significant percentage rely on financial aid (4%), government benefits (4%), freelancing for companies like Uber and Postmates (3%), or trust funds (2%) as their primary source of income.

Young adults’ go-to sources for quick cash may be putting them deeper in debt.

Debt is a serious issue for Gen Zers and Young Millennials. The average young adult owes $8,003. And how they choose to bridge the gap when they’re short on cash can all too easily exacerbate the problem.

When young adults found themselves running low on funds in the past year, 43% reported that they turned to their parents, and 25% borrowed from friends.

While these are typically low- or no-interest ways to make ends meet, many young adults chose expensive alternatives when times got tough—including skipping bill payments (20%), carrying a credit card balance (16%), and/or taking out a loan from a payday lender (7%). These options involve high interest rates that will almost certainly add to these young adults’ debt.

Young adults demonstrate an alarming confusion regarding good debt versus bad debt.

The trend among young adults of having high debt and low savings becomes even more concerning when we examine the uncertainty they demonstrate, as a group, about types of debt.

Survey results indicate that young adults are just as likely to say a student loan is good debt (38%) as they are to say it is bad debt (38%). A home mortgage is most likely to be seen as good debt (54%), and revolving debt is likely to be seen as bad debt (49%)—but neither of those data points indicates an overwhelming feeling one way or another regarding those debt types.

Good debt vs. bad debt
  • Student loans

    • 38% Good debt
    • 38% Bad debt
    • 24% Neither good nor bad
  • Home mortgage

    • 54% Good debt
    • 20% Bad debt
    • 26% Neither good nor bad
  • Revolving debt

    • 27% Good debt
    • 49% Bad debt
    • 24% Neither good nor bad

Considering these findings, it’s not surprising that over half (55%) of young adults express an interest in learning to distinguish between good and bad debt.

Young adults turn to parents for guidance about financial management.

Overall, the survey results also demonstrate that young people have a strong interest in learning about money management, including:

  • How to make enough money to reach their financial goals
  • How to save enough to be set in retirement
  • How to keep financial information secure
  • How to manage a budget for necessities
  • How to tell the difference between good and bad debt

As previously mentioned, 69% of young adults say their parents are good financial role models, and 39% rely on their parents as their most trusted source of information about finances (followed by their bank [25%] and online sources of information [12%]). Consequently, parents are in a good position to provide guidance and informational support for the next generation.

“The key takeaway here is that young adults want to learn more about responsible money management, and parents are in the position as a trusted relationship to teach them these critical skills,” says Carrie Schwab-Pomerantz, President, Charles Schwab Foundation, and Senior Vice President, Charles Schwab & Co., Inc. “We need to commit to educating our youth about money management so they have the opportunities to achieve the financial freedom they want and deserve.”

For more insights from the Young Adults Financial Literacy Survey:

Looking for ideas on where to start a conversation about money management?

Begin with the basics.

Whether you're a parent or a young adult, you’ll find these resources are full of insights to help you achieve your goals.

About the Financial Literacy Survey

The online survey was conducted by Logica Research (formerly known as Koski Research) from June 12 to June 20, 2018, among 2,000 Americans aged 16 to 25. Quotas were set so that the sample is as demographically representative as possible. The margin of error for the total survey sample is three percentage points.


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