Recession Lessons from Gen Y

After coming of age during tough times, young adults are leading the way back to financial security.

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Think young adults are drowning in debt and bad with money? Not so much. The generation who came of age during the Great Recession has learned a few things along the way, and it turns out they’re on track to make better financial decisions than their parents.

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A new survey by TD Ameritrade found that four in ten Gen Y-ers are watching the markets and their portfolios more carefully post-recession, compared to just three in ten Gen X-ers, who are currently in their 30s and 40s. Meanwhile, one in three members of Gen Y invested new money in the stock market recently, compared to just 14 percent of Generation X and 15 percent of Baby Boomers. Gen Y investors report they are also mostly on or ahead of schedule with their emergency funds and retirement savings, the survey found.

“Gen Y has accepted the reality of the past few years, and rather than being discouraged, they’ve changed their behaviors and are using what they’ve witness to their advantage,” says Nicole Sherrod, managing director at TD Ameritrade. “This is something that older generations could benefit from,” she adds.

Ready to learn from these savvy young adults? Here are ten tips from the generation who’s leading the way back to financial security:

1) Embrace tempered optimism. “I am absolutely optimistic that our economy as a whole will continue to get better, but I and many other young adults I know do not expect a return to the boom-times of our parent's generations. As a result, we're adjusting our expectations and, in many cases, our life choices, accordingly,” says David Weliver, 29, founder of the Money Under 30 blog. That might mean deciding to live in smaller homes, limiting car use, and cooking more instead of eating out.

2) Do whatever it takes to save for retirement. “I’m fanatical about the importance of saving for retirement,” says Weliver. “A few dollars saved today can grow so much, and we cannot count on others to provide for us down the road. So if you’re not already, opt into your 401(k) or open a Roth IRA for yourself,” he adds.

3) Find ways to earn extra money—and use it to pay off high interest rate debt. “In addition to full-time work, try to make some side income to help aggressively pay down any debt you have from college, from credit cards to student loans,” says Farnoosh Torabi, 30, author of Psych Yourself Rich. Paying off credit card balances in full each month will make it easier (and cheaper) to buy a home or car down the road.

4) Save a chunk of every paycheck. “No one looks back on their life and says, ‘I really wish I had saved less money,’ says Adam Williams, 27, who blogs about finances at He recommends getting in the habit early by putting away at least 10 to 20 percent of every paycheck. Automating those savings can make it even easier, since you’re not tempted to spend the money first.

5) Educate yourself, but make it fun. Blogs, websites, books, podcasts, online tools… there are endless sources of financial education today. “Pick something that appeals to your 20-something self. That will make money matters fun for you to learn,” says Emily Co, 26, associate editor of And don’t be embarrassed of any questions that you have. “It’s okay to be clueless,” adds Co. “Ask people who seem to have their personal finances in check. Remember to sift through their advice with a grain of salt and do your own research as well.”

6) Invest in yourself. “Each of us is our own biggest asset. The more we can do to improve our knowledge, skills, and motivations in ways that will help us win promotions or start businesses, the brighter our futures will be,” says Weliver.

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7) Spend time and energy networking. Getting up for that early breakfast meeting or leaving early for a professional happy hour meet up can sometimes be a drag, but those relationships can be key to success. “Networking is a crucial element of your job hunt or advancement in your career. You don’t have to target people in your field; be open to people who you like to be around and who you find interesting. You can benefit from just having a positive professional influence in your life,” says Co.

At the same time, pay attention to how your friends talk about money, too, and do what you can to encourage what Co calls a “culture of saving.” She adds, “People whom we socialize with play a huge factor in our lives, so good money habits will be more sticky if friends and family are constantly advocating them as well.”

8) Spend on worthy splurges. “There’s nothing wrong with spending $500 on a new bike if you ride it every single day,” says J. Money, 31, the blogger behind popular blog Budgets Are Sexy. “Just make sure you’re not spending a lot in all departments of your life. Don’t drive much? Get a not-as-perfect car. Never at home? Don’t buy a mansion. Spend on the things you love instead,” he suggests. Tracking your money with online tools can help ensure you know where your cash is going and that spending is in line with your broader goals. Then, Money says, you can easily take time for a monthly spending review. “If it helps, grab some chocolate and a glass of wine and make it exciting,” he adds.

9) Think long-term. “If you are planning to buy a house, considering graduate school, or planning a wedding, write down those goals and list the costs. It will help make you more aware of what you need to do with your money,” says Co. Torabi suggests projecting at least five years into the future and brainstorming about where you want to be.

10) Don’t settle. “We’re a society of instant gratification and convenience so going out of our way to haggle for lower bank fees or researching the best health insurance or retirement plan might seem like a hassle, but you have to get over that and realize that you’ll reap rewards in the long run,” says Co. That means researching all your options ahead of time and not hesitating to engage in a little back-and-forth over the final price, or calling your insurance company to question why a health care cost was denied.

Kimberly Palmer is the author of the new book Generation Earn: The Young Professional’s Guide to Spending, Investing, and Giving Back.