A new survey by Junior Achievement USA and global insurance company AIG finds that nearly two-thirds (63 percent) of teens are concerned about their parents’ preparedness for retirement while demonstrating a lack of education about their own. Sixty-nine percent of young adults ages 13-18 say they know little or nothing about financial planning.
“Based on the fact that teens are concerned about their parents’ retirements, one might think that today’s young people would be more focused on gaining a better understanding of money management, but these results show that’s not necessarily the case,” said Robin Wise, President and CEO of Junior Achievement-Rocky Mountain. “The most important message for teens is that by having a plan, and an understanding of what it means to retire well, they will be better positioned for their own retirements when that time comes. This is especially important as Americans are living longer than previous generations.”
When asked what they plan to do after they retire, teens cited traveling, hobbies such as golf or crafts, volunteering, and splurging on RVs or vacation homes as their top choices. More than a third (34%) of respondents think they will retire at age 60 or younger; however, one-third believe they will need less than $5,000 saved to retire and on average the teens plan to start saving for retirement at age 29.
In addition, 46 percent of teens are not confident they know how to plan for retirement. But teens’ lack of understanding about financial and retirement planning does not translate into a lack of understanding about the imperativeness of planning. Ninety-three percent say it is important to have a financial plan for retirement, and 92 percent find value in taking a personal finance class in high school.
When asked to identify descriptions and benefits of financial products such as 401ks, annuities, and social security, nearly half (49%) were able to correctly match 401ks, one-third (33%) were right about annuities, and less than two-third (61%) about Social Security. Definitions, though, are just the start of any education process and help is needed in the application: While many could define an annuity, less than one-quarter (21%) of teens identified annuities as a protected source of lifetime income compared to bank deposits, stocks and mutual funds—none of which can provide protected income that cannot be outlived. And only about half (51%) were somewhat confident that Social Security will still exist when it’s time for them to retire.
“We are on a mission to ensure that every American achieves a secure, fulfilling retirement, and that includes kids. The findings we uncovered with Junior Achievement make it clear that we must work with parents and educators to provide teens with greater financial education so they can truly understand what it takes to plan for and achieve the retirements they desire,” said Rob Scheinerman, President of Group Retirement for AIG. “Whether for teens or adults, through the work we do with Junior Achievement and other financial literacy efforts we support, we want to help people gain a deeper understanding of the importance of lifetime income, realize the true cost of retirement, and develop a solid plan for the future.”
To gain the knowledge they need for information about investing for retirement, teens say they would first go to their parents, closely followed by a financial advisor or banker, other family member, teacher, or friend.
- 63% are concerned about their parents’ preparedness for retirement
- 69% say they know little or nothing about financial planning
- 93% say it is important to have a financial plan for retirement
- 72% say they would likely consult a financial advisor about planning for retirement
- 34% expect to retire at age 60 or younger
- 30% agreed $5000 or less was enough money to retire
- The average age teens report they will begin saving for retirement at is 29
- 46% are not confident they know how to plan for retirement
- Nearly all (92-95%) students agreed that a personal finance course would be valuable to them
The JA/AIG Survey was conducted by Wakefield Research (www.wakefieldresearch.com) among 1,000 nationally representative U.S. teens, ages 13-18, who are not currently enrolled in college, between August 13 and August 20, 2018, using an email invitation and an online survey. Results of any sample are subject to sampling variation. The magnitude of the variation is measurable and is affected by the number of interviews and the level of the percentages expressing the results. For the interviews conducted in this particular study, the chances are 95 in 100 that a survey result does not vary, plus or minus, by more than 3.1 percentage points from the result that would be obtained if interviews had been conducted with all persons in the universe represented by the sample.
Categorized in: Financial Literacy