Advising the Financially Vulnerable New Gen Y Household

February 2016

Gen Y is the largest, most educated and ethnically diverse demographic group in U.S. history, projected to make up 75% of the world’s workforce by 2050.  


Members of Gen Y (also called millennials, born between 1980 and 2000) tend to be financially fragile. This study demonstrates the critical importance of engaging Gen Y early in their lives to help them manage their personal finances and ensure their financial well-being.

Key Insights
The typical Gen Y new household has a negative net worth, often the result of student loans.
As little as a 10% cut in income can wipe out a Gen Y household’s savings and endanger its financial security. Unexpected expenses (such as rent increases or car repairs) can have the same effect, as few Gen Y households have the liquidity to absorb finan
Gen Y households are more apt to need advice on basic budgeting, debt, liquidity and insurance than to need traditional financial advice, such as portfolio management.
Substituting variable costs for fixed costs can help Gen Y reduce leverage and permanent shocks to their standard of living.
Other solutions: use digital and social media for peer-to-peer information that “doesn’t preach.”

In a study spanning 16 years, the author asked 500 diverse, senior-level undergraduate students to create a comprehensive financial plan, build a financial balance sheet and analyze their financial positions. Using a representative sample of this information, he observed high levels of household leverage, measured in both operating and financial terms.