Financial Advice For the Gen X
April 26, 2000
Get A Financial Life, commands the title of a book published earlier this year whose target audience is 20- to 30-year-olds, the so-called Generation X (a term, it should be noted, that is loathed by pretty much everyone to whom it could be applied). Written by Money magazine contributor Beth Kobliner, Get a Financial Life (Simon & Schuster, 247 pages, $11) is only the most visible product of what appears to be a new trend: financial counseling for an age group that many people persist in seeing as irresponsible, lazy, whiny "slackers."Kobliner's book, published in May, is already in its eighth printing and recently reached the no. 2 slot on the New York Times' business bestseller list. In June, MTV and Simon & Schuster published a book by J.D. Heiman titled Now What?! A Guide to Jobs, Money, and the Real World (Simon & Schuster, 238 pages, $12). Green: Personal Finance for the Unashamed ($10 for a one-year subscription, $3 an issue; call 1-800-477- 2968 to request a sample copy), a "finanzine" established last year by Ken Kurson, has 10,000 subscribers and is garnering almost as much publicity as the new books. Investment market analysts are rushing to conduct surveys on the potential of this new wave of customers, who are rumored to be saving and investing at a greater rate than their predecessor generation, the Baby boomers.What gives? Is this just marketing and media hype -- the latest attempt by companies to get a handle on a generation that has had products relentlessly shoved down its throat since it was in diapers? Or does it reflect the financial anxieties of young people today, socking away those nest eggs to offset stagnant wages, low job security, high debts, and the fear that the social safety net won't be there when they've grown old?Well, it depends on who you ask. First of all, mass confusion reigns regarding precisely who makes up Generation X: is it 18-to-30-year-olds, 25-to-34-year-olds, 20-to-39-year-olds, the all-purpose "under 35" category? Which do you want it to be? Given that the definition is so amorphous -- and the demographic group under discussion is potentially so large -- it's no wonder these pesky young folks are difficult to fit into neat categories. Surveys conducted by financial market analysts will show you a fairly affluent, conservative, family-oriented group, earnestly investing in mutual funds for their kids' college educations. Other surveys show an angst-filled generation drowning in a sea of student loans and credit card debt.Only two things are clear. First, although it may be true, there are no hard statistics to show that Xers are investing more heavily than the boomers did at their age. (For one thing, a lot of investment opportunities exist today that weren't around back then; it's like trying to compare apples and oranges.) Second, there's definitely a market for good, solid financial advice for young people, because somebody out there is buying a lot of books and 'zines.It's also clear that the creators of the new financial advice publications mentioned above are not themselves part of some cynical marketing effort, regardless of any hype being generated around them. For one thing, their advice is geared toward people just starting their careers, trying to pay off their debts and find affordable insurance -- in other words, people without a lot of disposable cash."I'm sure there are people in their late 20s who Smith Barney would love to have as clients," Heiman told me. "But the reality is that most people that age aren't making very much money."And these young financial advisors are pretty skeptical of the claims that Xers are investing at a much greater rate than the boomers -- though they do tend to think that the boomers were profligate in their own youth. "Studies show that boomers have not saved for their retirement at the rate that they should," Heiman said. But "I don't think that young people are any more likely to save today -- they're just more likely to kvetch about it."AN ANXIOUS GENERATIONKobliner, Heiman, and Kurson are all quite earnest, even impassioned, about the difficulties faced by people their age in search of financial independence and security. When asked what inspired them, they each mention a lack of solid, straightforward financial information geared to the needs of younger people."There really wasn't a resource that dealt with the particular problems that people in their 20s and early 30s have when starting their careers and financial lives," Heiman said. "The books you see on the shelves either seem to be aimed at really successful people, or they're touchy-feely, feel-good manuals that deny the harsh realities."Kurson agreed that there is an "absolute black hole of information available for young people, especially information that isn't jargon-laden and totally off-putting."The other reason all three mention for doing what they do is that friends, coworkers, and others their age kept asking them all kinds of questions about financial stuff. The need was obvious, and it wasn't being filled.You wouldn't necessarily expect people in their 20s and early 30s to worry about things like retirement funds. But as so many pundits have pointed out, this is a rather anxious generation -- and for good reason. In the introduction to her book, Kobliner says that 25-to-30-year-olds today make about 20 percent less, on average, than did their counterparts in the '70s. "It made me realize that we're going to have to work a whole lot harder to get our financial lives together," she told me.And that's not the only problem Xers face; as Kobliner said, "We're really the first generation to begin our adult lives in debt." In fact, according to a 1996 survey conducted by USA Group Loan Services, the average student leaving college this spring had $10,146 in federal loan debt, compared to $8,858 for same period in 1995 -- a 15 percent increase in just one year.Add to that the very real problems of job insecurity, a rapidly changing workplace, and fears that the safety net -- particularly Social Security -- just isn't going to be there for them, and you can begin to understand why this generation has different assumptions about life than the generation that grew up watching Ozzie and Harriet.Young people today also have a far more complex financial landscape to cope with. The last 20 years have seen a proliferation of banking and financial services such as credit cards, ATMs, mutual funds, IRAs, and on and on. While all these choices can mean added convenience and greater opportunity for savings, they also mean that you have to pick your way through a maze of hidden fees and compounded interest rates."The whole explosion of financial services has really changed the landscape" of personal finances, Kobliner said. "It really complicates life quite a bit."And, according to Heiman, "A lot of these things that make your life superficially more convenient have all these hidden costs."FRIGHT, FLIGHT, OR FIGHTConfronted by all this confusion, and without resources that spell things out for them in language they can understand, young people tend to have one of two reactions -- fright or terminal boredom. In Green, Kurson has decided to take on the boredom aspect, along with the notion that it's uncool to take charge of your financial life. The magazine's manifesto reads, in part: "That's not rebellion and it's not freedom. It is the modus operandi of privileged and spoiled kids who know that their parents will bail them out when things get too rough." The magazine, he says, is for "those who don't care how cool it is to admit that they care about their lives and their futures."But Green is no deadly dull investment rag: it's a funny, well-written, straightforward guide to the world of credit cards, mutual funds, health care plans, and much, much more. The recent issue has short articles on such topics as how to look busy at work and how to beat a urine test, among other things.Both Kobliner and Heiman, on the other hand, seem to have been more inspired by the fact that so many young people are scared off by the complexities of today's financial world. "People do feel intimidated by it -- it's like math," Kobliner said. "But if you know the basics, it isn't so scary."Heiman added that coping with issues like jobs and money is "not only hard, it's unpleasant, and nobody wants to admit that. But once you get past your phobias, you start to have more power over your life."Both these books are excellent primers on the basics of, as Heiman put it, "the culture of being a grownup," but each has a different focus. Kobliner's deals solely -- and exhaustively -- with financial issues: credit cards, taxes, insurance, renting an apartment, buying a house. (She has also provided a handy cheat sheet up front, for those who don't have the time or attention span to handle the whole book right away.) Heiman, on the other hand, devotes about half his book to work-related issues, from developing job-search skills and crafting a resume to learning the ins and outs of office etiquette and schmoozing; there's even a section on starting your own business. The second half covers such topics as budgeting, credit cards, and finding an apartment.Like Green, both these books are refreshingly readable, sensible, and lacking in hype. To my mind, Heiman's book suffers a bit from the unfortunate generational predilection for jumpy page layouts (the dreaded MTV influence), but this will probably increase its appeal to its target audience. That lone quibble aside, I wouldn't hesitate to recommend any of these publications to anyone looking for good, solid financial advice for people on a budget -- no matter what their age.SIDEBAR ONETIP SHEETThe experts list their top financial tips for young peopleBETH KOBLINER1. Pay off your high-rate debts, such as high-interest credit cards, even if you have to use savings to do it.2. Start saving for retirement if you have the option to invest in a tax-deferred retirement plan such as a 401(k).3. Sign up for some kind of automatic savings plan through which either your bank or a mutual fund automatically deducts a certain amount from your account each month.4. Get health insurance. If you aren't insured through an employer, you may be able to get group rates through an alumni or professional association or a trade union.5. Shop around for the best deal on a bank account. Look for the lowest minimum deposit required to avoid fees, and make sure you understand exactly when and how much you'll be charged for things like ATM use.KEN KURSON1. Pay down high-interest debt.2. Take advantage of any tax-deferred investments available to you.J.D. HEIMAN1. Consider looking into mutual funds, even if you don't have a lot of money or know a lot about investing -- you don't necessarily need either. Mutual funds are a good way to get your feet wet in investing.2. There's no reason on earth not to be in a 401(k) plan if you work for a company that offers one.3. Think beyond savings accounts when thinking of ways to save money; there are far better investments.