Monday, March 7, 2011

Generation Y and Money

Brief How Do Echo Boomers Manage Money (data-only version)


As I write this introduction, many people are pondering what the future holds for the United States: we have increasing levels of debt, high perpetual unemployment, and a major generation about to retire. The purpose of this blog is not political or even social, but exists to communicate the economic and financial situation of Echo Boomers. What does the future hold for the United States, and how will Echo Boomers affect this future?

I have spent half a decade working for a large financial institution at a call center, beginning in simple customer service and moving upward in the financial consulting industry. The financial institution services over a third of American consumers, and I speak with an average of thirty-five Americans per work day. These American customers call from anywhere in the United States or throughout the world. Although the financial institution services some foreign customers, the bulk of our customers are U.S. citizens (partially due to the Patriot Act and the extra identification required for foreign consumers).

I realized a few years ago the opportunity I had to conduct studies for college classes because I had no control over the calls that came into our center. People could call from anywhere and could be anyone. I also noticed that we speak with quite a few non-customers as well daily, so any study, using callers, would be completely random with the exception of those too young to have any financial accounts.

My first couple of small studies that I conducted tested various sales techniques with callers. For instance, does using the word "feel" as opposed to "think" in a sales' phrase increase sales (answer: yes)? After my small studies, I saw an opportunity for a large study about Echo Boomers. I had focused on communicating with young people at my job and learning what sales' techniques worked with Echo Boomers. As an Echo Boomer, I have always been somewhat fascinated by how other young people, my age, managed their financial resources. Eventually, this curiosity got the best of me, and I began obtaining data from Echo Boomers - their liabilities, assets and goals.

There were multiple advantages to studying the Millennial financial data. Because I work at a large financial institution, on certain calls (loan applications) we have access to credit reports to verify information. Also, since many Echo Boomers call for help, they open up about their financial problems and standing. I am a believer that a sales person cannot help a customer unless we know (1) the customer's goals and (2) where the customer stands in their life.

Echo Boomers demarcate themselves quite easily from their peers as they don't mind answering survey questions, opening up about embarrassing financial situations, or even telling you stories that your grandparents would slap you silly for telling. I enjoy talking with Echo Boomers because they are honest and open about things other generations would never provide (especially financial information). On top of that, it's a blast to build relationships with them and help them succeed in a financial manner.

Why Study Echo Boomers

Echo Boomers are the second largest American generation, depending on when you date them (sources will place them anywhere from the late 1970s all the way up through 2000). This study only studies Echo Boomers born from 1980 to 1993, a significant American demographic.

Since Echo Boomers are a large generation, future supply, demand and economic possibilities will come from them. However, much of the future supply, demand and economic possibilities will be predicated on how Echo Boomers manage their financial resources. For an example, if Echo Boomers have little saving, how will a rise in a homeownership occur in this generation? Thus knowing a lot about Echo Boomers will help economists and financial analysts predict the outlook for the United States.

How Data Were Obtained

One of the many advantages of being in a que-based call center is the lack of control concerning calls. As a financial consultant, I was unable to control the type of customers that I received, and the ages varied. Because my interest rested with Echo Boomers only, I dismissed anyone outside the target range of age. Most of the calls were from existing customers, and their information, such as date of birth, social security number, and accounts, was present in our system. These calls offered no problems because I simply obtained the date of birth on the basis of what the system said. On occasion, however, a few non-customers called and wanted assistance on sundry services, but had no information in our system. As I built rapport with these customers I asked them, "About how old are you?" Without any problems whatsoever, every customer told me. Therefore, the survey was not limited to my financial institution's customers, as many of our callers were from other banks and were considering changing service.

"Echo Boomer" Definition. When I use the term Echo Boomer(s), I am referring to an individual born between 1980 and 1995. However, due to the age range at the time of this study, I only studied those born between 1980 and 1993. I also want to add that I use Millennial as an adjective (ie: Millennial financial data) and Echo Boomer(s) to refer to the actual demographic (ie: Echo Boomers have ...).
Social Categories. At the present time, the major social categories are U.S. born Echo Boomers and foreign born Echo Boomers. I have also divided the data by birth and gender, but for now, the posted data on this blog only reflect the above two categories.
Financial categories and definitions. The two primary concerns in my study were assets and liabilities. The definition of these terms may vary in financial classes, but are quite simple for my study. Assets included only checking/savings, investments, retirement, and money-based securities . Automobiles, homes, and rental properties were dismissed as assets, but included as part of the question, "Are you currently a homeowner?" Liabilities included loans limited to personal lines and loans, credit cards, student loans and auto loans. Mortgage balances were not included in liabilities. Debts owed to the IRS or collection agencies were also excluded from liabilities. Thus, anent liabilities, this study understates the debt of Echo Boomers.

Criticisms of the Study

  1. Married Echo Boomers presented a few problems since they viewed themselves as one person in a financial matter (ie: "We have ten thousand dollars in retirement"). I treated married Echo Boomers as separate indiviuals by dividing their assets and liabilities in half. As far as I know, the legal system would treat them the same in the situation of divorce. I should also note here that few Echo Boomers were married. I would estimate that fewer than three out of ten Echo Boomers were married, thus this problem was infrequent.
  2. Mortgage debt, collection debt and medical debt were eliminated. Few Echo Boomers were able to provide an estimate of these figures. I eliminated these categories early on, as the only debt Echo Boomers could elucidate on was credit card debt, student loan debt, auto loan debt, and personal and equity loans and lines. This, however, means that the study undercalculates the liabilities of Echo Boomers, though it also be of note that fewer than 11% of Echo Boomers are homeowners.
  3. During this study, credit card laws changed. Since the laws changed for younger Echo Boomers, that made it difficult for them to obtain access to credit cards. This should be of note as I expect to see young people with less debt concerning credit cards.
  4. Echo Boomers, who were not homeowners, didn't necessarily rent. One aspect of this study I realized after I was a few months into it was that close to half of Echo Boomers lived with relatives without paying rent. That information might be a reflection of the lack of financial sagacity and responsibility of many Echo Boomers, or a reflection of how financially arduous it is to live in some states (ie: California). In hindsight adding that category may or may not have helped provide information on Echo Boomers. In the 2011 portion of the data, I added the category "relatives" which translates into living in a place with no cost. If someone lived with relatives, but paid rent, they would be under the category of "rent." Thus, relatives is free-housing.

The Data

Comprehensive Generation Y and Money (long version)

This page now features multiple sets of data, including housing, financial, marital and employment. This post will update from time to time as more data are collected.

Important Note: As of July 2011, I resigned from my company (Wells Fargo). I have completed the Millennial study (approximate time 1.5 years) and compiling the final numbers, which the readers can review. As of now, housing, retirement and employment updates are all complete.

Housing Data (complete)

Financial Data (compiling)

Demographic Make-Up of Survey

Liabilities of Echo Boomers

Assets of Echo Boomers

Financial Data of Echo Boomers

Financial Distribution of Echo Boomers

Marital Data (no updates from this study, but updates from outside sources)

Other Generation Y and Marriage Posts:
Will Low Marriage Rates Sap the Housing Demand?
Will Marriage Become A Minority?
Will Student Loans Lower Marriage Rates?
Another Thing Generation Y Doesn't Like: Marriage
What Does Generation Y Say About Marriage

Employment Data (complete)

Employed: this category means that an Echo Boomer is receiving money for work of some kind. It may be under the table (not taxed) work, it may be part time work, or it may be flat out illegal work (drug dealing, prostitution, et cetera). But if Echo Boomers state that they are receiving pay for any kind of work, they are considered employed.

The government and most research organizations do not share the same definition. This means that my study will always have a lower unemployment rate than those organzations since someone receiving unemployment while working for "under the table" cash would be employed.

Unemployed: Echo Boomers who are not working.

In School: Echo Boomers who are in school only and doing no work on the side. In other words, Echo Boomers who babysit or mow lawns on the side while in school would be In School and Employed category.

In School and Employed: Echo Boomers who are in school and also receiving money for some form of work.

Stay At Home Parent: an Echo Boomer who does not work for money. This does not mean they don't work (as parenting is work), but that their partner financially provides for them and they don't receive any money directly for staying at home with children. Keep in mind that a parent who reports being "stay at home" while babysitting other people's children would be considered Employed.

No Echo Boomer can be a part of two categories; they are limited to one.