The term “generation debt” tends to get thrown around a lot when it comes to describing today’s young professionals. Media pundits—especially older ones who have long paid off their own student loans—like to point out that we carry a lot of debt and spend more than our paychecks. But is that really true? In my book Generation Earn: The Young Professional’s Guide to Spending, Investing, and Giving Back, which comes out in two weeks, I explain why we don’t deserve that label anymore. Here are five myths—and truths—about our generation and money.
[In Pictures: Top 10 Cities with the Most Debt]
5. Myth: We’re clueless about finances.
Truth: It turns out we know a lot—in some cases, more than our parents’ generation. A survey by the online brokerage firm Scottrade found that the recession actually inspired 20-somethings to educate themselves about how the economy works as well as to learn more about their own personal financial situations.
In addition, a higher percentage of respondents said they’re doing more research before investing relative to older groups. Scottrade reports that part of the reason we’re excelling at managing our money is because we see it as fun, instead of a tedious obligation.
4. Myth: We’re depressed about our financial future.
Truth: It’s true, we’ve had it rough: We’ve experienced two recessions before we’ve even hit our career strides (first from the dot-com bust, then from the real estate implosion) and unemployment is highest among young adults—an astounding 37 percent of people between the ages of 18 to 29 are unemployed or out of the workforce.
But we still manage to stay upbeat about our futures, an essential skill if we’re going to ride out these challenges. According to the Pew Research Center, only three in ten young people say they earn enough money to lead “the kind of life they want,” while nine in ten say they believe they will be able to do so in the future. Only 76 percent of Gen Xers and 46 percent of Baby Boomers say the same thing.
3. Myth: We waste our money on frivolous purchases.
Truth: We care less, not more, about brand names and keeping up with the latest fashion compared to older generations. Surveys taken since the recession show that 20-somethings report caring less about following the latest trends and styles, preferring a newer, frugal mindset. A survey by TNS Retail Forward found that shoppers in their 20s and 30s were most likely to buy the least expensive versions of products. Part of that comes from the fact that we’re savvy consumers—we grew up knowing how to use the Internet to find the best deal, and we don’t hesitate to use it.
[For more money-saving tips, visit the U.S. News Alpha Consumer blog.]
2. Myth: We earn less than our parents did at our age.
Truth: In many ways, we’re the richest generation to have existed. Yes, we face a relatively high unemployment rate, but the jobs we do have come with record benefits—largely health insurance-related. Studies by the Federal Reserve Bank of Minneapolis show that after you adjust for inflation and benefits, median compensation rates have increased 28 percent since 1975.
That helps explain why a Pew survey—taken after the recession—found that 60 percent of respondents under the age of 40 say their standard of living is better than that of their parents at the same age. Just 15 percent said it was worse.
1. Myth: We deserve the name “generation debt” because we have so much of it.
Truth: Yes, many of us carry student loan debt. And some of us carry monster credit card debt. But we’re not defined by it, because there’s so much more on our minds. We want to own nice homes, feel financially successful, support our families, one day send our kids to college, and change the world at the same time. Although we may now have some money to invest, our goals involve far more than just becoming rich.
The financial crisis of 2008 dovetailed with a growing interest in sustainability, simplicity, and even frugality. Instead of living exclusively for our own pleasures, we have embraced a new level of social consciousness. We care about the environment, our cities, and social justice.
The bottom line? We don’t need to resign ourselves to lives defined by debt. We can earn more, save more, and live more richly—largely because we’ve redefined what “rich” means.
Kimberly Palmer is the author of the new book Generation Earn: The Young Professional’s Guide to Spending, Investing, and Giving Back.