Beth Kobliner, author of Get a Financial Life: Personal Finance in Your Twenties and Thirties, recently stopped by my office to talk about the new edition of her book, originally published in mid-1990s. Since then, the Internet has revolutionized the way people manage their money and a recession has created new obstacles, which is part of the reason why she completely rewrote certain chapters. Kobliner explained why young people, who can be bitter about the current situation, also have reason to think things will get better. Excerpts from our conversation:
How is the current situation different for 20 and 30-somethings compared to what their parents faced?
It's a very different time. If you look at the unemployment statistics for people in their early 20s, it's over 12 percent, not the 8.1 percent of the general population. Many people think that in tough economic times, companies fire older workers. But companies are sticking with more experienced people. When you couple that with debt loads -- the current generation of young people have more debt than any other previous generation at their age -- it makes for a fairly bleak picture.
At the same time, in the late 1990s, personal finance was a tough sell. Now it's easier to make it clear to young people that they need to learn about money.
Is it possible to be optimistic as a young person right now?
When you know it's bleak, you prepare yourself. They're savvier, even though a number of them have lots of credit card debt. They're bitter in some ways but also savvier and realistic. They're paying more attention and realize they need to learn more. I also have the sense they're not going to make the same mistake as the previous generation of overspending on homes they can't afford and getting deeper into credit card debt.
Will young people be forced to delay big life decisions, like getting married, buying homes, and having kids?
Certainly this will result in getting homes later. You need a much bigger down payment now. Finances will play a bigger role in whether you go to grad school. Some young people say they don't want to take on more debt. The highest percentage of young people are living with their parents than ever before, so you might think that makes them less likely to have kids and get married. I think [the recession] will have an impact on delaying various life choices. People won't take the next step.
Is it a bad time to be young right now?
It's a tough time to be young right now. Parents need to have a bit of compassion. I don't want to sound Pollyannaish, but there is an opportunity here. The current generation is known as the coddled generation. Their parents would call their teachers and ask, "Why did my child get a B?" As parents face tough times themselves young people will no longer be able to rely on them.
Do you think 20 and 30-somethings will be untrusting of financial institutions for the rest of their lives?
That's one of the scariest parts about all this. Even if you did everything right, you still got punished. That's a difficult situation. I still think, if your company is matching your 401(k) contributions, then it's still a good idea, even if you're putting the money in a money market fund. It's all been mixed up in people's heads. They hear "401(k)" and they think "dangerous place to put money." You might as well be saying 'junk bonds.' They have to learn what to be afraid of and what not to be afraid of.